This post is sponsored by First Alliance Credit Union
As the COVID-19 pandemic has shown, sometimes life is not so certain. While pandemics are not common—thank goodness!—we’ve learned that events like a pandemic can result in a lot of unforeseen consequences, such as high unemployment and instability in financial markets.
This may sound scary, especially when we’re already doing everything we can to protect our children and families. The good news is while you may not be able to control the stock market or whether employers decide to lay workers off, you can control your personal finances with a few simple steps.
Step 1: Make a Budget
The absolute first step you need to take to start managing your money is to know exactly where your money is going. In other words, you’ll need a budget.
Making a budget is a vital step on the path to financial success, and it’s something you should already have. If you need to create a budget or update your budget to make it current with your financial situation, read the First Alliance Credit Union’s Beginners Guide to Budgeting.
Once you know how to make a budget, download the First Alliance Credit Union budget calculator to make the process as easy as possible.
While you’re making a budget for yourself, you can also teach your children how to make a budget. Show them how much you make in a month, then show them what bills need to be paid each month. You can also help them create a budget for themselves each month to help them understand the day-to-day costs of living and the benefit of planning where your money goes each month.
Step 2: Cut Down on Expenses
When most people create a budget for the first time based on their current spending habits, the first thing they want to do is reduce how much they spend each month. This is almost always a good idea, but it’s an even better idea in uncertain times.
Once you’ve created your budget and you know where your money is going each month, go through it and start getting rid of any unnecessary expenses. If you’ve been working remotely, you may have already noticed reductions in some areas of spending since you’re no longer commuting and grabbing coffee or lunch on the go – this is a great start. If you don’t have the ability to work from home, a good first step would be to cut down on the amount you spend on getting take out for the duration of the pandemic, if not eliminate that category of expense entirely.
You can also cut down on expenses by getting rid of any subscription services you haven’t used in over two months. Other options for reducing expenses including reviewing your phone plans for unused services, renegotiating insurance polices and talking with your internet service provider about lowering your monthly bill.
If you need some help figuring out where you’re overspending, try the My Money feature in First Alliance’s Online Banking. It’s free to all First Alliance members, and using it will let you see where your money goes each month. You can also use the My Cards feature in the First Alliance mobile banking app to set spending limits on your cards. It’s an ideal way to make sure you don’t accidentally overspend.
While you’re reducing your expenses, you can also talk with your children about what expenses you’re reducing and why. For instance, you can show your children all the subscriptions you have, discuss which ones they use most and then explain why you’re getting rid of the subscriptions you use the least. You can also show them why you’re not spending as much on eating out and then show them where that money is going instead.
Step 3: Pad Your Emergency Fund
Once you know where your money is going, the next thing you need to do is make sure you can remain financially stable in uncertain times. Ideally, you should have enough money to cover at least six months of your salary. While many financial experts say three months is enough, during uncertain times you really want to maximize your emergency fund.
If you don’t have six months of your salary in your living expenses, try to accumulate as much money as you can as quickly as possible. At least use all the money you’ve saved as a result of reducing your expenses to build your emergency fund. You might even want to use the funds you would normally spend for things like entertainment, clothes and eating out for a month or two to boost your savings.
If you have been laid off or had your hours reduced, and you’re worried about whether you have enough money in your savings account to meet your financial needs during this time, you can apply for a financial relief loan at First Alliance Credit Union. While you will have to pay interest on the loan, you won’t have to start making a payment for three months, and the low interest rate will enable you to pay back the loan without having to endure even more financial hardship.
If your children don’t understand why you’re putting money into savings instead of just spending it, you can take the opportunity to show them how compound interest works. Use the First Alliance compound savings calculator to show them how the money you save will not only come in handy during lean times, but also make money while it’s in your savings account.
Step 4: Reduce your debt
Now that you’ve got a budget and you either have or are working on an emergency fund, see what you can do to reduce your debt. While you might not be able to pay off your debts immediately, you may be able to reduce the amount of interest you owe and potentially lower your monthly payments.
One of the best ways to do this is through loan refinancing. When you refinance a loan, you take out a new loan with better terms to pay off your original loan. However, refinancing may also come with fees, so you’ll need to talk with a lending advisor to make sure a refinance is in your best interest.
Consolidation is also a way for you to simplify your debts. This allows you to pay one low interest rate instead of paying multiple rates—a good option if you have debt on multiple credit cards. It also combines several monthly payments into one low payment, which saves time and reduces hassle.
If you want to see how much you can potentially save by consolidating debts, download First Alliance Credit Union’s Debt Consolidation Calculator. This free tool shows you exactly how much time and money a debt consolidation loan can provide to you.
Another way to reduce your debt is to transfer your existing credit card debt onto a low-interest credit card, such as the First Alliance uChoose Rewards Mastercard, which also offers 0% interest for six months on balance transfers. If you know you can pay the balance off by the time the offer’s terms expire, this might be the plan for you.
Create Financial Stability for Your Family With Help From First Alliance Credit Union
Uncertainty is never fun. It’s stressful, worrying and downright scary for everyone in your family if you feel as though your financial well-being is at stake. Fortunately, you can create some stability for you and your family if you plan ahead, budget and make sure you have a healthy emergency fund.
First Alliance Credit Union can help you become more financially stable when you become a member today. You can rest easy knowing that your money is safe in traditional savings accounts, and you can use online banking and First Alliance’s mobile banking app to keep a close eye on your finances, as well as transfer money between accounts, pay off your credit card bill and even send money to friends and family with Zelle®.
About First Alliance Credit Union
First Alliance Credit Union is a full-service financial institution serving a five-county area in South East Minnesota for over 85 years. The credit union is committed to offering advice, sharing resources, and providing lending options to everyone in order to assist them in making smart financial decisions through every stage of life. First Alliance Credit Union serves over 17,000 members in the 5 South East Minnesota Counties of Olmsted, Dodge, Goodhue, Wabasha, and Winona. Membership is open to anyone who lives, works, worships, owns a business, or attends school in our 5 county communities. Depositing $5 is all it takes to open an account at Rochester’s original credit union.
