It hasn’t been an easy year for America: From state shutdowns to social distancing, millions of families were financially impacted by COVID-19 beginning in March and April. The economic downturn – which many hoped would be a temporary lull – persisted into the end of summer and is still being felt by many even now.
The average American now has about $74,000 dollars in debt – an increase of $8,000 from before the pandemic. On the other hand, families who are able to save are saving more. In April, U.S. households were setting aside about one-third of their income for savings – compared to just 7.5% in February.
That was partly made possible by the CARES Act passed at the end of March – but by the end of summer, the effects of that legislation had largely expired. With the holidays around the corner – and when extra money could go a long way – most consumers are now facing the full effects of our nation’s economic uncertainty.
No matter your situation, developing good financial habits now can help you stay on top of your household budget, manage debt and become more financially secure over the long term. Here are the steps you need to get started:
- Track your
finances. There’s no question that sitting
down with a budget and a bank statement can be stressful, but it’s
also the most important habit you can develop for financial
resilience. Take a few minutes each week to review how much you
earn, spend, save and owe – and to refresh your budget if
- Make saving a
habit. Most financial experts recommend
saving about 20% of your household income – but what if you’re
already struggling with debt? After covering your essential
household costs and making payments toward high-interest debts (like
credit cards), saving should be your next priority. Starting an
emergency fund now can help you avoid relying on credit cards
- Follow a repayment
plan. If you’re trying to pay off debt,
it’s worth it to plan your strategy in advance. A repayment plan
can break your payments into more manageable – and less
intimidating – amounts, while also helping you save time and
Start by listing all your debt (including the minimum due and interest rate for each) and determine how much you need to pay every month. Once you’ve made all your minimum payments, you can focus on paying off your highest-interest debt.
- Contact your lenders. If you’re in serious financial straits – especially as a result of COVID-19 – it’s a good idea to contact your lender and ask what relief programs are available. Right now, many companies are offering accommodations to families who are financially impacted by the pandemic, including waived late fees and adjusted payment plans.
There’s no such thing as a perfect plan when it comes to your finances, so don’t give up if things go awry. Instead, focus on consistency and resilience: Build good long-term habits and stick to them when you hit a rough patch.
At Axiom, we’re committed to supporting the health and financial wellness of community partners, small businesses and neighbors throughout the pandemic. To learn more about our services, including convenient online and mobile checking, visit www.axiombanking.com.
Axiom Bank, N.A., a nationally chartered community bank headquartered in Central Florida, provides retail banking services, including checking, savings, money market and CD accounts, as well as commercial banking, treasury management services and commercial loans for both real estate and business purposes.