I need to prepare

I’m anxious about the possible future impact on my finances and want to take steps now to prepare.

Step 1: Create a crisis budget

A crisis budget is a listing of the essential monthly expenses that you can’t avoid when a crisis hits, such as housing, food and insurance premiums. Anyone who hasn’t yet reached financial independence needs a crisis budget – this can help you navigate many life scenarios, including non-crisis situations such as parental leave or a sabbatical.

Check out various budgeting apps that can help you quickly evaluate past spending – this is where you’ll get the numbers
Tally your essential expenses and multiply that by 3 – that will give you a preliminary savings goal if you’re just starting your emergency fund
Here’s another helpful resource to give you some ideas to prepare: How one woman survived a furlough without payday loans

Step 2: Bulk up savings

While we wait out the COVID-19 crisis, there are ample opportunities to manage cash flow in a way that can help you build up your savings. The more you have in cash if/when you experience a lay-off or income disruption, the less stressful such an event will be on your finances. Here are some ideas to fatten up your savings account.

Read this post and decide whether to file your taxes now or later
Take advantage of the student loan payment suspension by putting that money into savings
What else aren’t you doing that you usually do? Commuting, entertainment, etc. – use that money to increase your savings as well
How to start your emergency fund
Try a side hustle – 40 Best Ideas for 2021

Step 3: Pay off or refinance high-interest debt

Ideally, you’d work to pay off any credit card or other high-interest debt (generally above 6%), but if that’s not realistic refinancing could decrease required payments and free up cash flow.

Explore balance transfer offers for high-interest credit card debt
Use the Refinance calculator to see if it makes sense to refinance your mortgage
The best cards for balance transfers

Step 4: Look for opportunities to save for longer-term goals

Once you’ve ensured that your financial foundation is set (i.e., you have 3-6 months of essential expenses in savings and you’ve paid off high-interest debt), you will have some breathing room to continue working toward longer-term goals. Should you end up out of work or facing reduced income in the future, you can quickly pare back these plans as needed. In the meantime, there is opportunity to make significant progress toward future goals if you have the financial capacity.

If you are eligible to make contributions to a Health Savings Account (HSA), work to contribute the maximum allowed for the year
Increase retirement plan contributions to help get you on track for retirement
If you’re on track for retirement, consider a 529 Savings Plan for future education expenses

All content is for informational purposes only and should never be considered, conveyed, or shared as legal, tax, investment, or financial advice under any circumstance.