Apart from the virus, there are also financial mistakes to avoid during this pandemic. Yes, making sure you are safe from the novel coronavirus is top priority. This is why shelter in place was ordered down to help keep the rate of infection down. When this happens, it will give healthcare facilities the chance to focus on those who are really sick giving them a better chance of pulling through.
But it does not mean that you should put everything else aside. Remember that society still has to continue moving forward. The economy is still trying to recover with a lot of industries and businesses feeling the pinch. It has been a challenging few months, to say the least. Business closures, lay-offs, and unemployment have been rampant throughout the country.
This is one of the reasons why you need to keep an eye out for financial mistakes to avoid during this health crisis. You could be working on a shoestring budget at the moment. Any mistakes you make could put you over and deep into the red. Once you get into that situation, it will be a lot more difficult to climb back out.
Regardless if you still have a regular job, the future is quite uncertain now more than ever before. It pays to be more attentive when it comes to your financial activity. The more in control you are, the better you can manage your finances. Here are a few examples of money mistakes to stay away from to help you manage your finances better.
Passive money management is one of the financial mistakes to avoid
One of the financial mistakes to avoid is simply choosing to be reactive when it comes to managing your financial affairs. This means that you are just waiting for situations to present themselves. You are just waiting for problems to appear. Especially now that the health crisis is still very much around, you need to start being proactive with your finances.
Start with your household budget and determine problem areas. Is your income dwindling down? Are your expenses too high? Are starting to miss payment due dates? The first step is to audit and identify areas you need to work on. It would be difficult to craft financial solutions if you have no idea what you are facing.
As soon as you identify the problem, create a plan, and follow-through. If your expenses are too high, identify areas you can cut down on. If you need to increase your income, check if you can take advantage of income-positive hobbies as a side hustle. You can also explore debt consolidation if you are already missing payment due dates because of too many accounts you have to keep tabs on.
Taking out too many credit cards
One of the most common financial mistakes to avoid is thinking it is a good time to apply for new credit card accounts. Having a lot of credit cards can give people a false sense of financial stability. You might start to think that your combined line of credit is an easy way to build up your emergency fund in light of the pandemic.
Even before you apply for a credit card, you need to make sure that this decision will help your finances and not the other way around. You might need a card to take advantage of a cashback on your groceries. One card might give you that peace of mind whenever you are making online purchases. There could be times as well where using a credit card helps you manage your budget.
There will be times when you would have to rely on your credit cards for emergencies. But this needs to be the exception rather than the rule. Applying for multiple cards all at once can cause your credit score to dip. This is because several hard pulls on your score can have a negative impact on the way credit bureaus compute for your score.
Borrowing money from family and friends
A lot of people could have their backs up against the wall when it comes to their finances due to the pandemic. As a result, borrowing money from family and friends seems to be a valid option. For one, there is a high chance of getting a positive response from people you know. On top of that, they might not even charge any type of interest on the loan. This is why this is one of the financial mistakes to avoid.
But one thing you have to think about is the fact that the health crisis affected everyone in some way and form. Family and friends might not be too open with their situation but they could also be going through a difficult time as well. Asking for a loan might put your personal relationship with family and friends at risk. CNBC even shares that some finance experts advise against borrowing money from family.
It will be a different matter if they are the ones who will offer to help. Even then, make sure that they are not offering to be polite. If you do end up borrowing money from friends and family, make sure you talk about clear repayment terms. Agree on terms if you will pay in installments or a definite date when you will pay back everything and follow it. This way, you get the loan and the payment settled so it does not affect your relationship.
Avoiding your lenders and creditors
During this health crisis, one of the financial mistakes to avoid is hiding from your lenders and creditors. You might start to think that once you stop hearing from them, everything is doing just fine. But the reality is that if you are hiding because of unpaid debt accounts then you will be in for a rude awakening when you get your statements.
You have to understand that when you avoid your lenders, your payments do not disappear. On the contrary, your payments will most likely increase the longer you avoid your lender. This is because penalties, fees, and other finance charges will start to accumulate on your account. You need to communicate with your lender especially with the health crisis still out and about.
You might be surprised that there are credit card lenders who have programs in place to help their borrowers during this difficult time. This is important as The Philadelphia Inquirer shares how the pandemic has accelerated the shift towards a cashless society. This means more and more people are using their credit cards for payments. Talk to your lenders and creditors and work on a payment program if you are having a difficult time meeting your payments. This is better than avoiding them entirely.
Hitting pause on saving money is one of the financial mistakes to avoid
You might begin to think that you can put a stop to saving money around this time since there is a pandemic. But you should not stop entirely with your savings. At the very least, you can slow down or make smaller contributions to your savings. But do not stop with it. These accounts can come in handy when you find yourself in a tight spot. It also helps you build up that good habit of saving money.
There are financial mistakes to avoid during this pandemic if you want to be able to manage your finances better. It is a tough time but if you think things through and make every financial decision count, you can get through this challenging time.