For many, the end of 2020 couldn’t come fast enough. The pandemic and resulting economic downturn took a toll, and left millions of Americans struggling financially.
With that in mind, Jeff Sobieralski, TCU’s director of financial wellness and wellbeing, provides steps you can take to get a handle on your financial life and prepare for the new year ahead.
For those who have been furloughed or laid off, Sobieralski says start by taking advantage of all the programs you are eligible for to help make ends meet. Then, make a budget.
“It begins with a budget. You can’t get where you’re going if you don’t know where you’re starting,” Sobieralski said. “A budget works as a roadmap to reference where you are at, on the journey.”
Sobieralski recommends using the 50/30/20 budget where you allocate 50 percent of your take-home income to needs, 30 percent to wants, and 20 percent to savings and debt payments.
Make sure you reallocate your spending categories as schools and businesses reopen, he says. In other words, if you start spending more on travel, gas, and restaurants, try to scale back on groceries, utilities, and at-home entertainment.
And if you have gotten used to spending less in general, try to continue that habit so you can increase your savings. He says to be mindful of small daily expenses that aren’t always accounted for, like coffee on the road or lunch out.
To get a handle on this “extra” spending, try saving your receipts and storing them in a designated location. Sobieralski takes a picture of his receipts and uploads the photos so he can refer back to them.
Another way to keep track of spending is to consistently use your debit card for purchases. That way, with Online Banking, TCU and other financial institutions effectively keep a virtual transaction record for you.
“The important thing is to identify the amounts you’re spending that are not accounted for,” Sobieralski said. “You might be surprised how quickly they add up.”
The new year might also be time to start saving for an emergency or retirement. Do this by paying yourself first, he said.
“TCU offers free tools to help. For example, our Mobile App and Online Banking lets members regularly transfer money to a savings account from another eligible account such as a checking account,” Sobieralski said. “Instead of waiting to put money into savings until after you pay your bills every month — set up automatic transfers to make saving routine.”
Many Americans don’t have emergency funds. And for those who do, many relied on their rainy-day savings in recent months. He said having savings can sometimes be the difference between continuing to manage or slipping into a cycle of high-interest debt.
“Those who can’t pay right away, tend to put expenses on a credit card. Some turn to a payday loan,” Sobieralski said. “It’s important to prioritize saving up some extra cash for unexpected expenses so you don’t have to turn to a high-fee option.”
Also, with the pandemic, you may be allowed to skip or pause payments for utility bills, student loans, or credit card bills. Consider getting in touch with creditors about relief options. For example, you could contact your landlord to set up an agreement to pay half your usual rent.
“If you have a lot of debt, you’ll want to make a specific plan for how you’ll tackle it,” Sobieralski said. “And be realistic. You’ll be better keeping your ambition in check, managing slower, steadier growth over a period of months.”
To help you grow your wealth and keep moving forward, Sobieralski recommends getting the whole family involved in creating a financial plan. He cites the Blair family of Indianapolis who involved their kids as they saved for their first home.
“The mom worked with the kids to create a goal poster with a thermometer to track their process,” Sobieralski said. “And after years of budgeting, they were able to close on their first home and surprise their kids on Christmas morning.”
Involving the children in the budgeting process helped them understand why the family was cutting back in certain areas. The kids also saw first-hand that saving money and building good financial habits can make a huge difference.
Embracing wellness is another lesson from 2020 that can help you make better money decisions, long after the pandemic ends.
“It’s also important to cut yourself some slack. Financial planning can be an emotional and difficult process,” Sobieralski said. “Think of a balance beam. It takes some time to keep from falling off. Your budget works the same way. When you’re first starting out, you’re going to fall off. Just get back on. That’s key.”
To learn more about Teachers Credit Union, visit www.tcunet.com.
