Many Americans are cautiously returning to the workforce after enduring months of lockdown during the coronavirus pandemic. If you’re one of the fortunate ones who are safely back at work and beginning to earn a paycheck again, it may be a good time to survey the financial damage. Many Americans depleted their savings and went deeper into debt after facing a layoff or furlough during the lockdown. While these are challenging times, you shouldn’t panic; instead, you should rebuild. Here are five great tips on how to rebuild savings after a financial crisis.
1. Set a Goal
If you want to rebuild savings, you need to set a clear goal for yourself. Determine how much you want to save and by when. You can use your own historical information to help you determine how much you need to save. Your pre-coronavirus savings may be a good starting point. However, you may have to temper either the savings amount or the time horizon for achieving it based upon your current employment situation. Alternatively, you could talk to a trusted financial advisor to determine a good target savings amount to strive for, based upon your current situation. Once you’ve determined your savings goal, you’ll be able to set out on a path to meet it.
2. Make a Budget
Once you know how much money you need to save, you’ll need to set a budget. Take stock of all your current income now that you’re back at work. Then, reassess all your bills and other expenses. Once you have a good understanding of your key cash inflows and outflows, you’ll be able to create a budget to help you achieve your savings goals. You can also use your budget from month to month to assess how well you’re doing meeting your savings goals. Take time to review your budget each month to determine whether you’re progressing toward your goal; if you’re falling behind, take the appropriate steps to get yourself back on track.
3. Pay Yourself First
Once your savings goals and budget are in place, you should maintain a focus on saving money at all times, instead of spending it. The mentality of focusing on savings over other aspects of personal finance, other than expenses or even earnings, is often referred to as “pay yourself first.” Living by the “pay yourself first” mentality can help you rebuild savings more rapidly, especially if you put measures in place to implement it. Some of the ways you can prioritize savings in your budget include automating payments from your checking account (where your salary likely is deposited) into your savings or retirement accounts. Additionally, you can also prioritize depositing funds into your savings account whenever you’re paying your bills or reconciling your budget. Regardless of how you do it, paying yourself first will put you on track to meet your savings goals.
4. Tighten Your Belt
If you want to accelerate rebuilding savings, one of the best ways is to cut out as many superfluous expenses as you can each month, and channel those funds into savings instead. For example, bringing lunch to work in lieu of dining out is a simple yet effective way to save real cash each month. Temporarily canceling your streaming services and other subscriptions could be helpful too. If rebuilding your savings is your top financial priority, you may also want to consider merely paying the minimum on any credit card balances you have and direct those funds towards savings. The more you’re able to save each month, the faster you’ll reach your goal. Once you’ve rebuilt your savings, you should refocus on reducing debt, and you’ll be able to splurge on Netflix and the occasional work lunch once again.
5. Find Another Job or Side Hustle
Another great way to rebuild savings after a financial crisis is to increase your income temporarily. If you have the time or capacity to do so, you can get a part-time job or side hustle. It may be harder to find additional work due to the COVID-19 crisis. However, driving services such as Uber and Lyft are beginning to operate, and there’s a large market for delivery services. Additionally, if you have a skill that’s adaptable to freelancing, such as writing, editing, coding, or graphic design, you may also be able to find work on freelancing sites such as Upwork. Any way you do it, bringing in additional income through a temporary job is a great way to rebuild savings after a major crisis.
Start Saving Again
Once you’re out of coronavirus lockdown and back to work, you should start saving as soon as you can. The five tips offered here can get you on track to rebuilding savings after a financial crisis and giving you peace of mind. Consider this advice and start saving more today.