Over the past few months, there have been many signs that we are in an economic recovery; despite some glitches, the Dow is still at record highs since the pandemic started. And while recently released GDP number fell short of expectations, there is little doubt that the economy is recovering.
Yet despite all of these indicators – including increased job growth – for many, the damage to their personal finances caused by COVID-19 will linger for many years as they look to reenter the workforce and pay off the debt they might have accrued during the last year and a half.
Even those who didn’t lose a job due to the coronavirus crisis may need to revisit their finances. Prices have risen and spending habits may have shifted.
Here are some tips from experts on how to get your personal finances back on track during the economic recovery.
1. Rebuild Emergency Funds
The pandemic took the nation by surprise and showed many Americans just how unprepared they were to withstand an emergency. Now, during the economic recovery as more people are going back to work, improving emergency savings should be at the top of your list. The experts advise that you set up a certain amount that you can transfer automatically from your checking to savings so that you are building or replenishing your emergency funds on a regular basis. A rule of thumb followed by many financial experts is that people should have three months to six months of living expenses in an emergency savings fund.
2. Pay Down Your Debt
Many Americans facing reduced income from the pandemic were forced to incur additional credit card debt. If you have returned to work and your income is more stable during this economic recovery, now is the time to pay down on any additional debt you acquired during the pandemic.
3. Take Another Look at Your Budget
The pandemic may have forced you to realize how you can cut down on certain monthly expenses like eating out and otherwise going out for entertainment and staying home instead. Now, instead of doing so to avoid the virus, you can stay home more often to better help you attain your financial goals. Taking another look at your budget also means that you may want to try to turn some “side hustles” or alternative revenue streams you developed doing the pandemic and turn them into full-time pursuits during the economic recovery.
4. Rethink Your Long-Term Financial Goals
People should also reassess their long-term financial goals. The past year set millions of Americans back in many ways. And for some, that meant pushing off milestones such as buying a house or car. Even during this economic recovery, however, getting back to pre-pandemic finances won’t happen overnight. And people should be aware of that and adjust their expectations accordingly. The ways you were planning to reach your long-term financial goals before disaster struck may not work now, even though the economy is recovering.
