2020 was a year of unknowns. If you had your share of surprises last year, you may be ready to embrace a new mindset of preparedness in 2021. Setting a plan to make sure your finances are sound and secure will help you get back on a path toward financial health and happiness.
What to Do Now
If you’re like many of us in the workforce, there’s a good chance that the pandemic impacted both your budget and your lifestyle. You may have dealt with job loss or reduced hours. You may be struggling to pay the bills or make ends meet.
Whatever your current situation looks like, if you feel like your finances are out of control, take a step back and follow these suggestions.
Get an Accurate Idea of Your Current Financial Situation
The first step to getting back on track financially is to figure out exactly what your current financial situation looks like.
Sit down either by yourself, with your significant other, or with your family, and list out all your expenses. You can do this on a piece of paper, excel spreadsheet, or with one of the many budgeting tools you can find online.
You’ll want to list your income and savings, then take all of your expenses into account (mortgage, credit cards, insurance, childcare, loans, bills, groceries). If you’ve taken advantage of a forbearance program for your utilities, mortgage, or other similar bills, make sure that you write out when that program ends and when you will have to start paying again.
The idea is to map everything out, see how it all lines up, then move forward proactively.
Make a Budget
Once you have a clear picture of your current financial situation, it’s time to put it into a budget. This will help you figure out exactly where your money is going, illuminate your spending habits and lead you toward your financial goals. It’s also useful for pandemic and emergency planning, as it can make it easier to deal with unexpected situations.
If your income is variable or fluctuating due to the pandemic, don’t worry too much. Instead, give your best guess on what your income will be in the coming months and aim to be more consecutive with what you’re bringing in and putting out.
Be Realistic About Your Expectations
Along with setting your budget, you’ll want to figure out your end goal—or at least, your end goal for getting back on the right track. For some of us, this may mean getting back to regular mortgage or rent payments and on track with your credit card bills. For others, it may mean putting away money for your down payment or adding extra funds into investments.
Where do you want to be financially next month? How about next year?
Fine-tuning your expectations will give you a goal to work toward. It will also help you figure out the path ahead. Try to be as realistic as possible in setting this target so that it’s reachable.
You might even consider having two types of goals—a realistic goal and a stretch goal. You can try to shoot for the higher goal, but know that everything will be okay even if you’re only able to meet the realistic goal.
When setting these expectations, make sure to discuss them with your budget partners (like your spouse or family). Not only does sharing your financial goals ensure that you’re all on the same page, but it gives you a support system to lean on, too.
What to Start Planning For
As you start moving forward with your budget and your goals in 2021, plan with the pandemic in mind. Visualizing what things may look like in the coming weeks, months, and years will help you stay on the right financial path.
Set up an Emergency Fund
One of the best ways to prepare for the future is to have an emergency fund, which is typically three to six months’ worth of expenses saved for the unexpected. If you don’t have one right now, don’t worry. Now is the perfect time to start one. Set aside whatever you can each month—whatever amount that may be. If you’re feeling discouraged, remind yourself that even just $50 a month works out to $600 a year, and that’s a great start.
If you’re already contributing to an emergency fund, keep it up, especially if you’ve had to dip into it due to the pandemic uncertainties. Making sure that you have the funds to cover any unexpected expenses will give you peace of mind as the pandemic continues to impact your daily life and finances.
Mentally Prepare for Changes
Part of the planning process is mentally preparing for unexpected changes. When you think about potential outcomes for the future, it helps you anticipate and prepare for any upcoming curveballs life may throw.
For example, how might you and your family handle a job loss? Do you have a backup plan? If not, it’s time to make one.
Thinking about and writing out possible outcomes helps you to prepare for potential life changes. You may find that one spouse working part-time or bringing on another freelance client may be just the ticket to keeping you afloat during times of uncertainty. Again, the more you’re prepared, the better you’ll feel.
Consider Online Banking
If you’ve been struggling to keep everything organized and in order during the pandemic, you might want to consider transitioning to online banking. With online banking, you’ll have all of your statements and documents in one location, just a click away. This will help you with budgeting and will also help to paint an accurate picture of what your finances look like.
Teachers’ online banking platform has a money management function that allows our users to add bank account info, loans, credit cards, investments, 401(k)s, and more from any financial institution—so you can see all your finances in one place.
When you have a better idea of where you’ve been financially, you can know where you’re going next. With our online tools and resources, we’ll help you get there with less stress and more confidence.
Final Thoughts on Pandemic Planning
We know that planning during a pandemic is especially difficult because it’s filled with so many unknowns. However, doing whatever you can now to get a handle on your finances will help you to feel empowered, even during this unexpected time.
As always, feel free to reach out to our team with any questions or concerns. Wherever this pandemic takes you, rest assured, we’ll be by your side to help show you the way.