Due to the pandemic created by the Covid-19, the economic downturn has started. The global economy has fallen. Many businesses are now facing closures. Large numbers of people are now jobless.
Due to this economic downturn, it is expected that a million people could lose their jobs. In this scenario, maintaining financial health is becoming difficult for people. People are struggling to manage their financial obligations. Most people are running out of savings. They want to save money but they are feeling overwhelmed by this financial trouble.
Now, people are struggling to save money. They are drowning in debt and other missed payments. Thus, it is important to get rid of these bills. After that, you can start saving money.
People who were trying to achieve financial freedom are now managing their household costs with their past savings. Moreover, a large number of people can’t benefit from their investment now. They fear that due to this pandemic, financial independence could seem unachievable.
It is true that now it becomes difficult to save money daily, but still, there are some steps you can follow to save money to enjoy financial freedom.
Step 1: get rid of your debts:
As we know the debt is the most dangerous enemy that creates a problem in saving money. Thus, you should pay off your debt fast to start saving money.
Here you go:
● Be careful when dealing with credit cards
Unfortunately, 70% of baby boomers are in credit card debt and not sure that they will ever be able to get out of it. Because they didn’t try to pay off their pre-retirement debt.
People consider credit cards as free money. To fulfill their wishes, they swipe their credit cards randomly and do not bother to pay the bills on time. As a result, they fall into credit card debt traps. The habit of using credit cards recklessly prevents them from growing savings or making investments to secure their financial future.
Thus, people have no other choice but to live with credit card debts and carry the debt to their retirement.
Remember, your credit card debt can make your financial life utterly miserable. The stress related to the debt along with the costly medical bills can ruin your life in early retirement.
● Pay off your credit card debt as soon as possible
Try to wipe out credit card debt as early as possible before you retire. Ignoring credit card debt can damage your credit score and create many other financial issues.
You can either pay off your credit card debt by making larger payments or opt for a professional debt relief service.
You can also use your tax return to make larger debt payments to become credit card debt-free sooner.
● Take advantages of a 0% interest rate card to pay off your debt
If you have excessive credit card debts to pay off, you can transfer your credit card balances to a card, which has an introductory 0% interest rate.
After you transfer your outstanding balance to that card, you should pay off the balance within the introductory rate period to avoid paying a high-interest rate.
● Cashing in on your life insurance policy
If you are nearing retirement and drowning in debt, then consider cashing in on life insurance to pay off your existing credit card debts. However, to get the benefit, you must have a whole life insurance policy. You can tap part of the cash value to become debt-free and still leave part of the life insurance benefit to your beneficiaries, such as a spouse.
● Convince your creditors for lower interest rate
If you have maintained your credit card properly, you can qualify for a lower interest rate on your current outstanding balance. Try to talk to your creditor by saying the financial hardship that you are facing to get a reduced interest rate. It will help you to pay off your current debt easily.
Step 2: Avoid falling into new debts
To start saving money, you have to avoid falling into further debts during this time. Here are some tips to follow to avoid new debts.
● Avoid signing up for credit cards randomly
Credit card companies in the market sell their credit cards by featuring various offers and rewards. You shouldn’t sign up for multiple credit cards to grab the offers.
Shop around to compare prices and interest rates between different credit cards before you decide to purchase one. This will help you choose the best credit card as per your needs.
● Review your credit card statements and credit report
Once this pandemic is over, you should check your credit card statements regularly. It will help you to understand whether or not there is any sign of fraud or illicit purchase. If you notice any unauthenticated or mischievous charges, contact your credit card company as soon as possible. Equally, you have to check your credit report from time to time.
A single error in your credit report can hurt your credit score. You should dispute the error with the 3 major credit bureaus (Equifax, Experian, and TransUnion).
● Avoid using credit cards randomly
You should use your credit cards when you face an emergency. You should change the habit of swapping your credit cards every time you feel like purchasing groceries, school supplies, and party supplies. This will result in increasing your debt problems.
Credit cards are said to be the essential needs of the people when you need cash in an unexpected situation. Avoid using it every time you have a shortage of cash.
● Avoid ignoring credit card bills
The major drawback of using a credit card is that you are charged a high-interest rate if you cannot pay off your outstanding credit card balances on time. Thus, it is important to pay the credit card bills in full and within the stipulated time. This habit will help you to stay debt free forever.
Step 3: Start living within your means
● live a frugal life
Most people love to live beyond their means. But, this is not the time to live a lavish life. Instead, you should live frugally. You should manage your money very wisely.
So, you should be careful about your spending nature right now. Ditch all the unnecessary expenses to save as much as possible. This will help you to overcome the loss you have faced in this economic downturn.
● Save whenever it is possible
You should try to save money as much as possible. It will help you to make lump-sum payments to your credit card debts.
By doing so, you can get out of your credit card debt. Isn’t it great!
● Create an emergency fund
You should try to save at least 9 months of savings in an emergency fund to manage this kind of uncertain situation. So, instead of spending money on everything, you should try to save that money. Cut down unnecessary expenses to save money.
Lastly, the pandemic could create even more trouble for people who want to save money to achieve financial freedom. So, you should try to get rid of those pesky credit card debts to smoothen your money-saving journey as much as possible. You should try to raise your savings to achieve your goal. Don’t rely solely on Social Security benefits. Save money efficiently so that you can avoid financial crunch during this pandemic.