While the United States economy appeared on a trajectory of unstoppable economic growth, the pandemic collapsed this unprecedented era of expansion. Although much of the economic downturn that followed in 2020 was blamed on the lockdowns and the ensuing collapse of businesses and the rise of unemployment, there is much more to the story.
The pandemic didn’t create a debt crisis, but only uncovered government, corporate, and personal debt that had been growing for years. Many years of low-interest rates had encouraged personal debt as a way of life, a pattern of overspending encouraged by an aggressive advertising industry. The focus on luxury purchases to enhance social status stimulated the free-flowing circulation of money.
The pandemic interrupted conspicuous consumption, putting an end to excessive spending on luxury products and services because people are now confined to staying at home focused on frugality rather than ostentation. This economic decline following the drop in consumption means that you as a consumer will have to rely on your own ingenuity and resourcefulness to rebuild your finances before the economy picks up again, something that will happen once the health crisis abates and enough people have been vaccinated for normal life to resume.
Your first order of business should be to reduce your debt burden because this is draining your ability to pay your bills, save, and invest. Next, consider ways to improve your understanding of personal finances. Finally, plan for your future by starting your retirement savings.
Use an Efficient Way to Pay Down Debts
With many high-interest rate bills that require monthly payments, these are steadily draining your finances, reducing your ability to pay your basic expenses, and restoring your financial health. Balancing your budget becomes increasingly more difficult the more you owe. If you owe $10,000, or perhaps more, then look for a way to pay off your debt faster.
One efficient way of paying off your debts is to get a consolidated loan. Now, instead of paying high-interest rates to multiple lenders, you will only pay the loan provider at a lower interest rate.
When you get a debt consolidation loan, you will end any harassment you might experience from collection agencies. The incessant volume of calls and letters will end. Now, instead of making multiple payments, you’ll simply make a single payment, paying an amount that you can consistently manage to pay every month.
Increase Your Financial Literacy
Fortunately, you don’t need a degree in finance or a background in accounting to take charge of your personal finances. All you need to increase your financial literacy is to take the time to learn more about the best practices for managing your money.
You won’t need an MBA in finance to figure out how to budget, save, and invest. You can educate yourself about personal finance easily. Gather information about personal finance from podcasts, blogs, books, and online courses, then practice a few suggestions to manage your money better.
Prepare For Emergencies
You never know when something could come up that shifts your finances. Whether your car battery dies or you end up losing your job, you want to be able to cover it without putting yourself deep in debt. If your emergency is minor, you could always visit sites like WesternShamrock.com to apply for a no credit check loan. You can handle the problem and then repay the loan in installments.
If you’re dealing with a more serious financial emergency, having an emergency savings account is best. An account with three to six months of expenses in it can reduce the need to charge a credit card, borrow from loved ones, or dip into your retirement savings.
Plan for Retirement
You can never plan for retirement too early. In a similar way that your formal education took years to prepare you for a better-paying job in the working world, you must spend a considerable amount of time preparing for your retirement.
First, talk to a financial advisor on how to plan for your retirement. Create a realistic game plan.
Second, start saving a small amount from each paycheck toward your retirement. This money will then grow through compound interest.
Third, contribute to your company’s retirement-planning program, a 401(k) plan will put your pre-tax dollars to work for you. When your company matches your contributions, it is like receiving free money.
Adopt a Proactive Attitude
Although the United States appears in turmoil, things will eventually get sorted out, the health crisis abating and the economy recovering. But rather than waiting for change, reduce your debt, increase your financial literacy, and start planning for your retirement.
