Vaccinations against Covid-19 are on the rise. Mask mandates are deleted. Businesses are reopening.
What should you do to be on track with your money during the economic recovery?
The US economy is showing signs of life as the country reopens and returns to a new normal after the coronavirus pandemic. Weekly jobless claims fell to a new pandemic low of 406,000, and the economy added 266,000 jobs in April, a positive gain, albeit below expectations.
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“What we have seen is very positive, very encouraging news. It gives me hope and I am optimistic for the future,” Federal Reserve Chairman San Francisco told CNBC, Mary Daly, during a recent interview with “Closing Bell”. She also said the Fed has yet to see enough progress to change policy.
Many households still face the impact of the pandemic and will be for many years to come, even as the economy recovers. And, even those who haven’t been hit so hard by Covid may need to reassess their finances, as lockdowns have shifted spending priorities and patterns – as things return to normal, inflation has taken off. increased, which can be of concern to consumers who are not prepared to spend more. for goods and services.
Additionally, silver experts say after being caught off guard by the coronavirus pandemic, many Americans may now be more concerned with preparing for the next possible economic crisis.
Here’s what experts recommend people focus on as the economy reopens and recovers.
1. Rebuild emergency economies
The pandemic came as a total surprise and showed many Americans how unprepared they are for an emergency. Now, as the United States rebuilds the economy and more people return to work, building emergency economies should be a priority.
“Best financial practices are about the hard times and the good,” said Mark Hamrick, senior economic analyst at Bankrate. “We urge you to make emergency savings a priority.”
A rule of thumb followed by many financial experts is that people should have three to six months of living expenses in an emergency savings fund. But 13 months after the start of a pandemic that left millions unemployed, people may be rethinking their savings goals.
“It should make people think a second time about using the rule of thumb and think about their own specific situation,” said Dana Menard, Certified Financial Planner and Founder and CEO of Twin Cities Wealth Strategies in Maple Grove, Minnesota.
Depending on their career, industry, family, and specific needs, some people may want to save more or even less in an emergency savings fund to prepare for the next event.
“Three months is just the starting point,” said Tania Brown, CFP and coach at SaverLife, a nonprofit focused on savings.
2. Pay off the debt
Another high priority financial goal recommended by experts is debt repayment, especially for those who could have taken more to keep themselves afloat during the pandemic.
“If you’ve owed $ 25,000 in debt, you can’t manage your finances like you don’t have $ 25,000 in debt to pay off,” Brown said. This means that people should come up with a plan of action to pay off debt with one of many strategies, such as paying off high interest debt first or focusing on the easiest debt to get rid of faster.
Now is the time to plan for debt management, according to Brown. In recent months, with a third round of stimulus checks and tax refunds, families in particular could have thousands of extra dollars to roll out.
Of course, some people may want to pay off their debt before building up emergency savings or working toward both goals at the same time.
If people can afford to work on multiple financial goals at once, they should, Menard said, adding that not everyone has the ability.
3. Rework your budget for the new standard
The past year has been unusual, and for many it has resulted in drastic changes to their fixed budgets. Whether people lost their jobs and had to find other sources of income or found they had extra money due to canceled trips, budgets may need to be updated.
This is also important as people begin to reenter the world as it opens up after the pandemic. They should be very careful not to let their enthusiasm lead to overspending, Brown said.
It is also a good idea to check if the cost of certain goods and services is the same or has changed due to the pandemic.
“Be aware of creeping inflation – things could cost more,” said Marisa Bradbury, CFP, CPA and investment advisor at Sigma Investment Counselors in Lake Mary, Florida. “Really consider what that inflation will be – what you think you budgeted before might not be enough.”
If you have money to allocate for fun activities such as entertainment, shopping, or travel, Bradbury recommends that you recheck with your budget and set aside a specific amount to avoid overspending. This is especially important for retirees living on a fixed income, Bradley said.
4. Recalibrate and revise your financial goals
As the United States emerges from the pandemic, 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 back steps like buying a house or a car.
“If they’ve been hammered in by 2020, they may have to postpone retirement for a few years; that’s okay,” Brown said. “They may need to take care of some of those financial fundamentals first.”
Even if the economy recovers, however, the return to pre-pandemic finances will not happen overnight, according to Brown. And people need to be aware of this and adjust their expectations accordingly.
“What worked in 2019 or even 2020 may not work now,” she said.
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