It’s a new year and a new proposal is well underway for a third stimulus check to struggling Americans. While the economy is showing signs of a slow recovery, millions of Americans remain unemployed. If approved, the stimulus check will provide necessary financial relief to those who need it the most.
Reeling Effects of the Lockdown
This past year many small businesses were forced to close their doors putting millions of Americans out of work without notice. The small mom-and-pop shops in every town across the nation as well as the entertainment and hospitality industry took the hardest blow. With vaccines now available, there’s new hope that the pandemic will soon end and life will return to normal. However, it will take time to recover from a sizable loss.
The sudden loss of income put many families in jeopardy of losing everything. Hanging on by a thread, they learned how to do without. Unfortunately, the mortgage or rent and overhead bills still require payment. Thankfully, the previous and current administration put measures in place to protect suffering families from eviction or foreclosure through the end of March.
Digging Out from Under
Living on a reduced income caused many hard-working families to rely on their credit cards as an additional source of income. Unfortunately, it’s only a matter of time before the credit cards reach their maximum available credit.
Nearly a year removed from the initial lockdown, many people now have large sums of credit card debt. With another stimulus check showing promise for approval, many people plan to use the money to help pay down their credit card debt. A more effective, long-lasting approach is to reduce debt with a debt consolidation loan. The right finance company will help roll your debt into an affordable payment that is easier to pay.
Another option to dig yourself out of this vicious cycle is to use your tax refunds. A professional tax prep service can help you get the highest return possible. Whether you acquire a few hundred or several thousand dollars, you can use this to pay down debts, get caught up on bills, and boost your savings. Then, you can use your stimulus check for something more advantageous.
Avoid Radical Decisions
In an effort to alleviate a deficit created by the pandemic, some people are opting to take money from their retirement fund. If vested, you can borrow a percentage of money from your 401(k) and pay back the loan each pay period. Borrowing from your retirement puts your financial future at risk, though.
Others, see the stock market starting to slow or sustain losses and are considering pulling their money. These funds are in place to provide wealth in retirement. Before making a decision, weigh the pros and cons carefully.
A Bright Outlook for the Future
COVID-19 will fade and life will return to normal. Getting your finances in order now will ensure a speedy recovery. Thankfully, there are things you can do to improve your current financial status.
Cutting back on unnecessary expenses like take-out will free up money you can then use to pay down debt. Cable television and cell service are two monthly bills often with room for improvement. For the short-term contact your service provider and opt for the lowest fees possible. Insurance is another area where people tend to overpay.
Combining your homeowners or renters insurance and your auto insurance with the same agent will provide additional savings sometimes as much as 20%.
There are some financial lessons learned from the pandemic. Life happens and unfortunately without a savings account in place you stand to lose everything. Create a household budget and allocate money to an emergency fund. While the amounts can vary, most people have money to cover three to six months’ worth of bills and daily expenses. Make small weekly deposits until you have a sizable safety net. This will prevent financial ruin in the event of a short-term income interruption.
The pandemic took the country by surprise. As a result, many families suffered large financial setbacks. The good news is with several vaccines currently available and working their way through the population, a return to normal life looks promising. Hopes for a third stimulus check will provide needed money for many families to buy food and essentials. However, being financially responsible by adopting new habits regarding your money will allow you to remain afloat and experience a bright financial future.