There are signs that the U.S. economy could dynamically accelerate this year as employers have already started hiring workers back. A sign that the coronavirus induced recession might technically be over. Simply because the U.S. financial system isn’t in as harsh of a place as it once was. Here is a list of financial tips for success in a rebounding economy. Use these money management tips as a mini-guide to create financial stability.
Top 8 Financial Tips
- Evaluate Your Finances
- Payoff Debt
- Cut Down Unnecessary Spending
- Have You Checked Your Tax Withholdings?
- Super Size Your Emergency Savings
- Create A Monthly Budget
- Invest In Yourself
- Think Long Term
Financial Tips For Making And Saving Money
There is good reason to be optimistic, but you still want to take a serious look at your personal finances to set yourself up for success and security in the coming year. Preparing your wallet for harsh economic times should be an essential part of your financial health, downturn or not.
Here are 8 financial tips to help you secure your finances:
1. Evaluate Your Finances
One of the good things about getting a jump on things now is that you have to sit down and go through all your financial documents. For example, your bank statements, your investments, credit card bills and other statements and get organized.
That will start you down the road to being ready for tax day. As well as truly knowing where you stand as far as your financial fitness is concerned.
2. Pay Off Debt
It’s crucial that you pay down any outstanding debt that you have incurred. More specifically, high-interest debt. Such as your credit card balance, to create some breathing room in your budget. As the coronavirus has demonstrated, economic downturns can often lead to major job loss. If you’re worried about job security, paying off your obligations will bring you more peace of mind.
Prioritize credit card debt, then turn to other types of loans, such as mortgages or personal loans. Student loans, however, have more favorable provisions, which makes paying them off less urgent. Even if you’re not worried about losing your job in a downturn, it’s still good financial best practice.
3. Cut Down Unnecessary Spending
After evaluating your finances you should have a clear picture of your monthly income and expenses. It is necessary now, to cut out or at least minimize any unnecessary spending that is occurring. This is one of the more surprising financial tips. Simply because you will be amazed at how much money you can save if you really want to.
Until you have your safety net in place this should be ongoing. You don’t have to stop going out occasionally to have some fun. But, looking to cut costs should be your focus.
4. Have You Checked Your Tax Withholdings?
Typically, you set the amount of income tax that gets withheld from your paycheck when you start a new job and fill out a W-4. But life changes, like getting married or divorced, having a baby, a new dependant or buying a home may affect how much you want to withhold during the year.
Plus, if you’re keeping too much or too little from your paycheck, that could mean a big headache at tax time. For instance, you could end up paying too little taxes throughout the year. As a result, you may end up with a hefty tax bill. This is often one of the most overlooked financial planning tips.
You can discuss your withholding amount with a tax professional or use the free IRS tax withholding calculator to see if you’re withholding your desired amount.
5. Super Size Your Emergency Savings
Job loss will make it difficult for most Americans to pay their day-to-day expenses. Boosting up your emergency fund, the pool of cash you put away specifically for events like downturns. Will make it possible for you to still comfortably afford your necessities while you search for a new position.
Of all the financial tips, there’s no way around this one if you want to be financially stable. Even if you’re paying down debt, it’s important that you prioritize saving money. Focus first on loading up your emergency fund with two months worth of living expenses.
After that, pay off your debt, and then focus on building up a reserve of three-to-six months worth of emergency funds. A high-yield savings account can help you earn more on the money you put away.
6. Create A Monthly Budget
Experts typically recommend spending no more than 30 percent of your net income (earnings after taxes) on non-essential items. It’s a good idea to create a monthly budget to ensure that you’re living within your means and not overspending on these items.
I’ve created a few financial income and expense forms for you to use below to create a financial budget and savings plan. Feel free to copy, print, and use as needed.
Click this link for a free Monthly Income Record Form to help you keep track of your income.
Click this link for a free Expense Record Form to help you keep track of your expenses.
Click this link for a free Savings Planner Form to help you keep track of your savings deposits.
7. Invest In Yourself
To recession-proof your life, one of the best investments you can make is to seek more knowledge. During a recession, the unemployment rate for those with a bachelor’s degree or higher is much lower than for those who have a high school education or less.
8. Think Long Term
Stocks plunged sharply in March, as investors worried that the pandemic might cause irreparable damage to the shaky U.S. economy. But markets have since rebounded to dynamically new highs, amid an “all out” response from the Federal Reserve and a massive fiscal stimulus package from Congress.
Nonetheless, the path forward is uncertain, meaning the weeks ahead could still be rocky. Even with the S&P 500 at a record high, investors have still been through several volatile days in the red. Even though, changing your long-term strategy is the worst thing you could do.
That goes for all individuals, whether you’re 20 or 60. If you’re planning to retire within the next few years, it might be a good idea to have your first few years of withdrawals already in cash. Still, don’t shy away from equities in your portfolio. That is where you’ll get the most returns that provide inflation protection.
If You Plan To Invest Consider These Top 3 Stocks:
1.Caterpillar (Nasdaq: CAT)
Commodities prices are climbing as the economy heats up and demand expectations increase for natural resources like oil and copper. This trend is likely to continue accelerating. Industrial companies like heavy-machinery maker Caterpillar is at the core of early economic recoveries.
Caterpillar’s construction equipment sales will benefit from infrastructure legislation. And there is a bullish outlook for sales of products used for servicing oil wells and heavy equipment used in mining. Caterpillar’s earnings are expected to grow by 25% per year over the next three years and give a price target of $275 per share.
2. Ecolab (Nasdaq: ECL)
When restaurants and hotels closed or drastically reduced operations amid the pandemic, demand for cleaning supplies and services from Ecolab took a hit. Now, with increased tourism, business travel, and more people eating out again. Made possible by the vaccine rollout. Sales are likely to see an impressive increase.
3. Chevron Corp. (Nasdaq: CVX)
People cooped up at home during the pandemic are itching to travel. This means there should be an increase in demand for oil if they’re able to do so as vaccines help reopen the economy. The price of oil and shares of companies that produce it have already risen substantially this year. And it’s not yet peak summer driving season.
With demand for crude expected to strengthen from a recovery in travel, tourism, transportation, and other segments of the economy. Energy stocks should continue their recovery after being decimated last year. The stock has not yet made it back to where it was before the pandemic-led crash. But having gained more than 25% this year, it’s well on its way.
Prepare yourself for the worst, but hope for the best. Downturns will always come at a bad time if you’re not prepared for it. Even more so, when there’s a pandemic to deal with. Regardless of whether a storm is on the horizon, it’s always a good time to make sure your finances are in order.