How to save money during COVID-19 epidemic

How to save money during COVID-19 epidemic

By David Kilby
Due to the coronavirus epidemic, 30% of Americans have withdrawn money from their emergency funds ahead of time. The percentage is significantly higher for millennials: 45% of millennials have tapped their emergency funds, compared to 32% of Gen X and 16% of boomers.

The harsh reality is the snowball effect it creates. People are having difficulty managing their current expenses, leading to the need to access emergency funds. What does one do to save?

The fastest way to create a more accessible fund is to stop savings, whether it is a 401 (k) contribution or the elimination of automatic transfers to an emergency fund. But unfortunately, this only aggravates the problem. During challenging times, it may seem difficult to develop or maintain a savings strategy - but taking time to find the most effective solution allows for financial growth and future stability.

Savings can be the same to reduce spending
The easiest way to save money is to spend less. Businesses and individuals alike are looking for ways to curb spending, that is, increase in available funds. This may mean reevaluating your budget and determining where you can cut back. Small amounts will add up over time. Online money management tools provide effective options for creating and managing budgets. Once the budget is established, it is relatively easy to keep track of expenses, identify spending trends based on current behaviors and make adjustments if the desired goal is not reached.

Sometimes it is difficult to objectively evaluate your own finances, but speaking with a financial coach or advisor can help you develop a budget, streamline existing finances and find ways to save more. A few small adjustments can add a good monthly sum. Once you gain control of your finances and are confident that you can successfully handle the necessary expenses, you will be able to invest the savings into an emergency fund or retirement account without making additional sacrifices.

Another way to save by spending less is to evaluate the outstanding debt and determine which loan gives the most interest / cost structure. By using the money available to pay off the highest cost debt, you will save in a few ways. You get an immediate and known return on your investment, which is equal to the interest / fee paid on the loan that you did not pay off that loan. Paying off debt can also improve future credit / FICO scores which is directly correlated with the cost of future loans. Ultimately, you will pay less for credit in the future if and when you need it.

Ready to save and invest?
The first step is to identify how much money you expect when it comes time to retire. Be honest with yourself and be realistic about retirement expenses. The worst thing is that you have to understand how much money you will need in retirement, so aim high. Once you retire and your income runs out, it will be too late to add to your fund.

Now plan appropriately and adjust your contributions to support your proper spending habits. Consider unpaid loans, cost of living goes up and health problems have to be faced. Online budget calculators can help you determine how much you need to save based on anticipated expenses.

All should aggressively fund the ultimate insurance policy - their retirement fund. If your employer offers a matching contribution, take advantage of it! To ensure that you earn the match, maximize your contribution to the best of your ability - this is free money, and this is often not the opportunity for us to accept free money. This tax-deferred investment vehicle, depending on your tax bracket, can generate greater returns than traditional investments in the after-tax market.

There are many ways to invest money in your retirement account. If you take more risk now, the rewards get higher over time. However, the chances of losing money also increase. It is important to measure your risk tolerance. Make sure you understand the risks and are comfortable with the potential losses. The longer the time period between your current age and retirement age, you can opt for risky investments in your portfolio as your investments will have time to face market volatility.

If risky investing makes you uncomfortable, then build a portfolio that you feel comfortable with. You do not want to cause additional financial stress to your retirement portfolio, but you should play an active role in managing your investments to ensure that your portfolio allocations will be able to meet your retirement goals. This is another great opportunity to lean on the professional guidance and recommendations of a professional coach or financial advisor.

To cope with these uncertain times we need a different type of focus on our finances. Most people face new challenges that must be included in their financial decisions, requiring a different type of knowledge and consideration. While short-term requirements have taken a high priority during this time, establishing a long-term plan is an important element to ensure the ability to maintain financial stability and in the future.

About the author - David Kilby
David Kilby is a personal finance expert and president of FinFit, a fintech company that provides more than 150,000 employers with a unique financial wellness benefit platform.