As a lot of businesses and economies try to weather the effects of this coronavirus pandemic, it is possible that debt is piling up for affected Americans. This is because a lot of people either lost their jobs or asked to take unpaid leaves because the company is not doing good. The experience is different per person but almost everyone can see what it is doing to their personal finance.
There is a sigh of relief as CNBC shares that the stimulus bill is already on its way to people. Eligible taxpayers will receive about $1,200 for individuals and even $500 for each qualifying child. This could be a big help especially if your resources are dwindling down having no work all while having a lot of expenses at home to worry about.
As the world tries to weather the health crisis, your expenses will not stop altogether. You will continue to buy and purchase essential needs for you and your family. This includes food, medicine, and other important things you need at home. Utilities will also be a big part of this especially when you are asked to shelter in place for a few weeks.
With continuing expenses and your income affected, there is a good chance that debt is piling up as the days go by. You do not have enough income to cover recurring expenses. Once you find yourself in this situation, you start to look for options on how you can cover your expenses. It is also possible that you begin to stress about it affecting your mental health. If you are going through this at the moment, here are a few things to keep in mind.
List down your debt obligations
Once you notice that debt is piling up, you need to make sure that you list them down in detail. It is not enough that you try and remember all the details. This might work for the first few items but as you start to juggle multiple details all at the same time, you might begin to forget things. Once you overlook details pertaining to your debt payments, it can have huge financial repercussions.
When you jot down your debt obligations, make sure you make it as comprehensive as possible. This means you do not only write down who your lender is and the amount you pay every month. It is important to put in as many details as you can. Put the name of your lender, the amount you need to pay, interest rate, and even their contact details.
Doing so can help you prioritize your payments depending on your situation. If you choose to pay down the smallest amount first to get some mental win, you can easily determine which one it is. You could be looking to save money from interest payment so you want to pay down the one with the highest rate. Your list will come in handy.
Review your household budget
When your debt is piling up, you also need to look beyond your expenses. Your household budget is one of the most important financial tools you have at your disposal. Even before this health crisis, your budget should always reflect your financial standing. It will not be much of a use when you do not update your budget. This is important because Gallup shares that only 1 in 3 American households create a detailed budget.
As mentioned earlier, you need to make a comprehensive list of your debt payments. This should include your recurring and essential expenses at home. Now your budget is a two-pronged financial tool. As you list down and manage your expenses, you need to do the same with your income. These two go hand-in-hand when talking about your budget.
With the coronavirus shutting down a lot of businesses putting jobs in limbo, your income could be affected. If it is, look at your emergency fund, savings accounts, and other sources of credit you have on hand. If you are lucky and you still have a job, jot that down as well. The idea is that your income is bigger than your expenses.
Is there a way to increase your income
If your debt is piling up, one thing you need to seriously look into is finding a way to increase your income. This is one tough goal considering that a lot of people are losing their job because of the pandemic. However, you still need to exhaust your options to help you bring in more income to your finances.
If you still have a job, it is possible to put in some overtime work or pick up extra shifts. You might also hear about side hustles you can pick up after work. This is something you can explore as well. One of the best ways to help you bolster your income is to look at online work. This is something you can choose to do when you get home or even on weekends. One good thing about this is that you get to dictate your hours as well as your rate.
There are a lot of opportunities online that you can explore. You can get into teaching other people skills they can learn online. It is also possible that you become a writer, graphic designer, photo editor, or anything related to what you already love to do in the first place. You can also finally get that online business up and running though you need to conduct due diligence. Factor in the current economic situation when setting up a business so you can find opportunities.
Find a way to lower down expenses at home
When debt is piling up and you are having a difficult time increasing your income, the next step is working on your expenses. You need to start working on a lean budget where you find ways to cut down on your expenses. This is one of the ways where you will find very good use of a comprehensive household budget.
With your list of expenses, look at it top to bottom and identify areas you can lower down. There is a good chance that your mortgage or rent is at the top of the list. You can explore refinancing your mortgage if you have a better score than before. It is also possible to look for a lower rent somewhere else but maybe get to that when the health crisis is over. Relocating is a bit challenging at this time.
If you are sheltering in place, this is a great opportunity to start cooking your own meals for you and your family. You would need to buy a lot more in the groceries but this can come out a lot less expensive. Especially when you compare it from having to order take-out food night after night. You also ensure that you prepare healthy meals for the family which is important during this crisis.
Look into consolidation when your debt is piling up
There are times when your debt obligations start to pile up because you have too many payments to account for every month. One way to simplify this process is to consolidate your debt payments under one account. Doing so will help you manage your payments better since you will only have to deal with a few details.
For one, consolidating multiple accounts with one lender helps you concentrate on one payment. There is also a good chance of making lower payments every month. This is possible if you are consolidating with a lower interest rate. If you choose to spread out your payments over a long period of time, it can come down to a small payment amount. Just know that you could be paying for a bigger total in the end.
You need to get a grip on your finances during this health crisis especially when you notice that your debt is piling up. It is important to take a look at your budget especially your expenses to help you stretch your funds and cover more essential needs at home.