A year after the pandemic hit, we are still suffering its effects in many aspects of our lives, but more so in our finances. As we go through 2021, we continue to struggle and deal with the aftershock of a huge financial blow from the previous year, and at the rate, things are going, it might take us another few years to completely straighten out our own finances and recover from what seems like the worst financial disaster of our lives.
Admittedly, it’s not easy to recover from our current financial situation. But with diligence, discipline, and using a strategy to achieve your financial goals, it can be done.
Here are three things that can help ease your financial worries, re-strategize, and take the first steps towards financial recovery.
Refinance Your Mortgage
For many, their biggest financial obligation is a montage loan. While there is a possibility of mortgage interest rates increasing in the foreseeable future, this year’s interest rates are still relatively low compared to rates in 2019 and even in 2020.
That said, it might be a good idea to consult a mortgage refinancing firm and come up with a new payment plan that will allow you to take advantage of a lower interest rate, change your loan term, make lower monthly payments, and even get cash from your home equity.
The adjustment in your mortgage loan can tide you through the effects of the pandemic as the economy recovers and buffer financial shocks that might occur down the line. While you can still take advantage of low interest rates and your financial standing allows you to do so, it’s best to act now so you can get a good deal for your mortgage interest rate and find significant savings.
Review Your Student Loan
Currently, student loan payments are on hold and won’t resume until October 2021. The 16-month pause has given a form of financial relief to most borrowers, especially to those who have been strongly hit by the pandemic.
However, the pause might be extended. Given the situation and the current pause in payments, it may be a good time to review your loan and map out your future payment schedule. This will make you financially prepared, whether an extension is approved or otherwise.
By having a payment plan in place, once payments resume, you can start making payments immediately. In the event of a massive student loan cancellation, you’ll have some money in the bank, which you can save or later invest in bonds, mutual funds, or stocks.
Challenge Yourself to a No-spend Month
The no-spend month challenge requires commitment and discipline. But this challenge can change the way you handle your money and improve your buying decision-making skills as a consumer.
Most people spend more money than they earn. Ergo, they’re continuously on a financial negative that gets harder and harder to recover from with each passing month.
The interest amount on credit card bills can easily pile up. And before you know it, you’re paying more interest than the actual amount of money you owed the bank initially. To get out of the cycle, it’s important to pay off your balances and avoid making unnecessary purchases.
It would help to write down the items you normally spend on and include that amount that goes into each of these items. This will make you more aware of the amount of money you’re spending on these things and help you decide which items you should focus on immediately.
To start with your no-spend month challenge, pick one or two things that you spend your money on the most. Once you’ve identified what these are, commit to not spend on any of them for the next 30 days. To make this work, these two factors should be present: the items you want to focus on and the specific amount of time to complete the challenge.
You can use the saved money to pay off credit card debt or put it towards your savings. By focusing on one or two items per month, you can keep track of your expenses much easier and motivate you to improve your financial habits.
Once you see the fruits of your financial efforts, you will become more determined to practice better financial habits and keep doing it until it becomes natural.
Recovering from a financial setback brought about by the pandemic can be done, despite the current economic climate. By exploring your available options for a loan, mortgage, and other financial obligations, you can take advantage of lower interest rates and help you cut down on monthly payment costs. At the same time, by practicing financial discipline and establishing better financial habits, you can successfully reduce and pay off all of your credit card bills.
These steps are just the start of your journey to financial freedom, but these steps will lead you towards financial success.