The Most Important Thing to do With Your Money During the Covid-19 Pandemic
Millions of Americans have been impacted by the Covid-19 pandemic — physically, emotionally and financially.
While the unemployment rate is improving (it dropped to 6.3% in January 2021, much better than the 14.7% it hit at the beginning of the pandemic in April 2020), many Americans are still feeling the squeeze: 14% of U.S. adults, or about 46 million people, were forced to empty their emergency savings during the crisis, according to a September 2020 CNBC + Acorns survey.
Another survey, from FinanceBuzz, found that almost 30% of Americans have decreased retirement contributions or stopped saving altogether to free up cash in order to cover expenses.
I’ll start by saying, I’m super positive about things long-term: There’s never been a recession or depression we haven’t recovered from. The economy will recover. The markets will recover. We will recover from this. But it’s smart to prepare yourself for volatility if you haven’t already done so.
Regardless your situation — maybe your hours have been cut and you’re struggling to make ends meet, or you could still be employed but are worried about job security in the future — there’s one thing all of us should do with our money right now: You need to have absolute clarity around where every single dollar is going.
This is good practice in general (not just during a recession), but especially now, you should be going through your expenses. Pull out your credit card statements and look at what you spent your money on in the last 90 days. What can you cut? There’s bound to be some unnecessary expenses in there. What subscriptions are you signed up for that you don’t need? Cancel gym memberships, social memberships, anything subscription-related that you rarely use or don’t use at all.
Have you been ordering more takeout than normal during the pandemic? What about online shopping? Look at what expenses you can cut like your life depends on it.
And don’t forget the big expenses. Are you one of those people who loves two cars? If so, it’s a great time to get rid of one of them. If you have storage facilities with stuff you haven’t looked at in a year, let the stuff go. Better yet, sell the clothes, furniture, appliances or electronics you don’t need anymore to make a little extra cash.
You may not have control over your employment status right now — but you can control your spending. Even if you have a job today, you may not have it in 60 days or even 150 days. So if you’re currently employed, I still want you to find ways to cut your spending — then, take that extra money and put it in your emergency fund. Those who have more cash are going to have an easier time getting through these difficult times.
Now, check out my full guide to financial recovery, which I wrote with Money.com to help you navigate these turbulent times.