The Pandemic and Personal Finance
Jeff Sobieralski, Director of Financial Wellness and Wellbeing, Teachers Credit Union
Understanding the basics of personal finance has never been more important. With the coronavirus pandemic causing massive market volatility, job and income losses, and a level of financial stress not experienced more than a decade, it’s essential to focus on fundamental principles — how to budget, track spending, effectively pay off debt and properly plan for retirement.
Financial literacy education should also include organizational skills, consumer rights, global economics, attention to detail, and risk. It’s important to remember that risk management is not just about the stock market and investing, but unexpected things too, like a car breaking down or, as we have learned in the past few months, a pandemic. Times like these remind us of the importance of financial literacy to endure hard times and prepare for uncertainty.
TCU offers tools and insights to develop your knowledge and make informed decisions when it comes to investing and managing your money. We hope these resources will help you plan for the expected and prepare for the unexpected:
TAKE A FINANCIAL LITERACY COURSE – From middle schoolers to adults, it’s never too early or too late to learn the principles of effective financial management. The free TCU Financial Empowerment Program, powered by FoolProof, offers interactive sessions on topics from improving credit scores and avoiding predatory lending to making smart saving and spending decisions. Participants may use one module — or all 18 — and can start and stop at any time. And it’s all free. Get started here.
CREATE AND STICK TO A BUDGET – Take the time to track your income and spending. Then develop personal priorities based on the facts, rather than guesstimates, to establish goals that you want to meet. TCU can help you learn how to create a simple budget here.
EXPLORE BUDGETING WITH A FLUCTUATING INCOME — A challenge for many right now is planning a monthly spending plan without knowing how much they’ll earn or when then the next paycheck will come. One strategy for making the most of an irregular income is the zero-sum budget. With a zero-sum budget, your income and expenses should even out, so there’s nothing left over at the end of the month. The trick is to treat savings as one of your monthly expenses.
Physically separating your savings from your everyday spending money may be especially important when you’re budgeting on an irregular income. You may be tempted to pull funds from your savings during low-income months, but stashing some money in a separate, higher-yield savings account — like TCU’s Premium Money Market account — can cause you to think twice before dipping in. An easy way to put this tip into action is to have all of your income deposited into one account, then make a “payment” to a separate savings account.
CONSOLIDATE DEBT – For many people, debt burdens drag down their financial progress. TCU can help you consolidate debt to make it manageable and expand your financial freedom to allow you to focus more on long-term goals. TCU’s personal debt consolidation calculator is designed to help determine whether debt consolidation is right for you.
BUILD AN EMERGENCY FUND – The best way to weather low-income periods is to prepare with an adequate emergency fund, setting aside money for expenses such as a medical issue, broken-down vehicle, or furlough due to the pandemic. Generally, you’ll want to save enough money to cover three to six months of your regular expenses. Once you build your fund, you can put extra savings toward other financial goals. An emergency fund can help you feel more at ease knowing that you’ll be able to pay your bills and meet your needs even if your income drops.
In the midst of such a difficult time, it’s hard to think long-term, but our current circumstances highlight the importance of practicing financial habits that provide a cushion when the unexpected happens. The goal of financial literacy is to prepare yourself to weather the next storm during the times when clear economic skies prevail.
Jenn is the IAACE Executive Director. Her passion for adult education shines through in everything she does for IAACE. You can invite her to a chat for questions anytime. Click here to book a time to chat with Jenn