Many Americans want to put the year 2020 behind. To say it was challenging is an understatement. The pandemic brought on a lockdown of the country causing many people to suddenly lose their jobs and children and parents learned first-hand about remote learning. On a positive note, the negative financial impact has opened the eyes of millions of hard-working families to the importance of financial wealth.
Forced to live on a single income, many families accumulated excessive credit card debt. Unfortunately, having large sums of debt from multiple places can be difficult to make timely payments. To further compound the problem, the high-interest rates don’t allow you to reduce the credit card debt quickly. Though another stimulus check looks promising, it will only provide a bandaid to your current situation.
Thankfully, there are a few other options available. You can start paying down your debt one credit card at a time. You can use the refund from your 2021 tax filing to pay off your credit cards. Lastly, you can apply for a debt consolidation loan. They offer a single monthly payment at a much lower interest rate.
The Needs and the Wants
Many people get into financial difficulty because they don’t separate the needs from the wants. There is a difference and in tough financial times, the wants must remain on hold. You need things like a roof over your head, reliable transportation and food on the table. The wants are anything else.
Remaining Debt Free
You need to have a plan of action. You should use the next stimulus check (if it passes) to buy food and essentials and put the rest away for emergencies. You also have measures in place to slowly reduce and ultimately eliminate credit card debt.
Unfortunately, unless you also include changing your spending habits you’ll end up in the same financial position again. Poor money management prevents many families from leaving the paycheck to paycheck way of life. As this past year’s virus proves, this type of lifestyle will certainly lead to financial ruin.
The Household Budget
A household budget gives you the tools to achieve a bright financial future. It identifies the amount of debt you owe and from where it derives. This allows you to create a plan to reduce debt and adopt better money management skills.
You allocate funds for things like buying a home, college and your retirement. You also learn the importance of savings. That having funds in reserve will prevent you from using money already set aside for bills, thus keeping your credit in good standing.
Picking Up the Pieces
Reduced to a single-income home, many families suffered financial hardship. The sudden change caused many families to fall several months behind on their monthly bills. Picking up the pieces will take time. However, if you remain focused and committed, you will reap the benefits. For the short-term, doing without the extras is necessary. Once you recover you can treat yourself to a few luxuries.
A Bright Financial Future
The present state of your finances may feel like an eternity. However, if you stay the course, practicing fiscal responsibility, the future is bright. Reckless spending will only provide temporary relief from depression and will have long-term consequences. Getting further in debt will not help the current situation.
A Nest Egg
A large percentage of the workforce lives paycheck to paycheck. They have no savings set aside for emergencies. Unfortunately, things will happen that require money to fix them. Without it, you’ll end up borrowing money already allocated for bills or run up large balances on credit cards. A stimulus check is something that comes along rarely. It’s up to you to create your own safety net to avoid financial problems.
The lockdown caused by COVID-19 put many families in financial turmoil. Use recent events as a wake-up call to get your finances in order. Create and stick to a household budget, reduce debt, curb spending and put money away for your retirement and emergencies.