How COVID-19 Affects Your Financial Goals with The Fiscal Femme
The coronavirus outbreak hasn’t just changed the way we work, travel, or socialize, it’s effectively turned our lives upside down. What’s more, news, policies, and market changes make understanding what’s happening to our wallets even harder.
Enter Ashley Feinstein , founder and CEO of The Fiscal Femme. The Fiscal Femme offers resources, tools, and, articles to help promote financial literacy for women. On April 29, Feinstein led a webinar in partnership with SoFi.
During the webinar, she touched on how the economy has changed, what it means for people’s finances, and the seven steps budgeters can take right now to help put away money towards what they really care about.
What’s Going On and What Does It Mean for My Money?
In Feinstein’s words, “the market has gone bananas, and not in a good way.” The US stock market went from an all-time high at the beginning of the year, only to drop 30% in the wake of COVID-19. In the last five weeks, 26 million people filed for unemployment, and the S&P has officially declared our economy in a recession.
In reaction to this unprecedented change, Congress passed a $2 trillion stimulus package to assist Americans who have lost their jobs.
Unemployment benefits have been boosted for those who qualify, and unemployment guidelines have changed to help those who work part-time or are self-employed.
When it comes to money and COVID-19, there’s more happening than just a $1,200 in a stimulus check. 2019 tax filings are delayed until July 15, 2020, and federal student loans are in forbearance until fall .
With a new policy coming out nearly every other day, figuring out personal finances right now may feel complicated or even downright impossible.
Before diving deep into numbers, Feinstein recommends everyone give themselves some leeway. We’re in unprecedented economic times, and we’re not sure what the future holds.
Seven Steps that May Help Put Away Money
One thing Feinstein firmly believes in is taking action steps. Taking action can lead to progress, and even the smallest steps add up to big results.
As many of us reprioritize financial goals, here are seven steps budgeters can take to put away more money right now.
Step 1: Starting with the Big Picture aka “Happiness Allocation”
The term “budget” can be a turn-off, so Feinstein uses the term “happiness allocation” to describe how to map out finances. People can take a look at their spending, and see where they’ve been allocating their dollars.
Ultimately, spending and saving habits should make a person happy, right? It’s a matter of where the dollars are headed, and how that makes a person feel.
This process takes time and can mean pouring over credit card and bank statements, but it’s a worthwhile way to see what’s happening with a person’s money. Budgeters need to have a clear idea of where they’ve been and how they’ve been spending to understand where they’re headed.
With a clear idea of where spending has been, the next step is thinking about where it’s going. Are there savings goals that will change in the next year? Is there a big purchase planned? This can change the happiness allocation overall.
Just because we don’t know exactly where our money will go doesn’t mean budgeters shouldn’t try to set some money aside and update as they go, says Feinstein.
To accomplish this step, simply take “Total Income” minus “Total Expenses” to see what’s left available for savings goals.
Step 2: Letting Go of Expenses
Feinstein asked participants to list the top three things that they spend money on that makes them happy. Responses poured in:
• Nights out with friends
• Chiropractor visits
• Boutique fitness classes
• Dining out
Imagine someone spending more on the things that’ll make them happy. If a person has more wiggle room in their happiness allocation, they could have the freedom to spend more money on travel, explained Feinstein.
Enter opportunity costs. When a person spends on certain items or services, they lose the opportunity to spend that money elsewhere, perhaps on something they truly love doing.
Looking at happiness allocation again, Feinstein asked budgeters to consider the number of meals with friends they’re potentially losing out on by spending on things like seldom-used streaming services.
By her calculations, paying close to $200 a year for something like HBO GO would equal roughly the same amount of three dinners out with friends.
When it comes to opportunity costs, there are no right answers. Deciding to spend on HBO GO over dinner with friends isn’t “right” or “wrong.”
It’s about making spending choices that work for each budgeter and realizing what a person might gain or miss out on based on spending.
Step 3: Finding Other Ways to Reduce Expenses
There may be some expenses that people can’t part with entirely, explained Feinstein, and that’s when reducing expenses comes in handy. Ask:
• Are there free or less expensive alternatives to this expense?
• Are rates negotiable?
Participants in the webinar shared examples of where they saved in their happiness allocation, specifically in the time of COVID-19.
They negotiated car insurance down because they were driving less or asked cable companies for a lower monthly bill. There’s no harm in asking or exploring more frugal alternatives.
Aside from reducing expenses, Feinstein also suggested embracing frugal joys in this time of economic uncertainty. Taking a walk, having a movie night, or crafting with things already at home are simple ways to have fun without spending.
Step 4: Planning Ahead for Bigger Expenses
“Plan so there will be money when you need it,” Feinstein suggested. The further in advance a person plans for a big expense, the less “pain” they feel each paycheck.
Think about it. What sounds more painful? Saving $3,000 for travel in a year’s time, or trying to fund it in two months?
When a person plans for a big trip, move, or even pricey salon visit, the sooner they start saving, the less it’ll hurt.
This is where tools like SoFi Checking and Savings® vaults can come in handy. Budgeters can set aside small amounts of money each month in a special checking and savings account, so when the day comes to pay, settling the bill feels painless.
Step 5: Looking into Refinancing
Given that interest rates are so low right now, it might be time to consider refinancing student loans, mortgages, or personal loans.
Paying a lower interest rate could mean savings over the life of the loan, but people have to decide, based on their personal finances, if the decision is right for them.
(It’s important to note that refinancing things like federal student loans can mean losing out on other federal benefits like forbearance or loan forgiveness.)
Step 6: Making Savings Goals Automatic
For some, that’ll mean setting up automatic transfers, which move money to a separate account for monthly savings goals and safekeeping. Setting it up automatically means budgeters don’t even have to think about it—saving becomes effortless.
Step 7: Finding Community and Accountability
People have a 65% likelihood of doing something if they share the goal with others, and a 95% likelihood of doing something if they schedule a “check-in date” with a buddy, explained Feinstein.
Our lives might be full of gym buddies or study buddies, but rarely do we have money buddies. It might be hard to talk about with another person, but the more someone shares their savings and money goals, the more likely they are to achieve them.
Feinstein suggested finding a money buddy, then sharing action items with them to keep a budgeter honest.
Discussing Financial Goals with a SoFi Planner
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Student Loan Refinancing
If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) Please note that once you refinance federal student loans, you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans, such as the SAVE Plan, or extended repayment plans.