There have been a few times in history when humans were presented with the degree of uncertainty we’re currently facing. The economic recovery from the pandemic is still underway. Consumers are dealing with excessive debt and rising prices. Businesses are faced with material and labor shortages. Governments are struggling to figure it all out.

Don’t despair. The future is still promising, but the path is fraught with pitfalls. This is the time when we need to put some work in to secure our personal finances. Individuals and families faced unprecedented challenges during the 2020 pandemic. Staying physically healthy was the top priority. Financial health, unfortunately, often had to take a back seat.

If you’re struggling with your personal finances, we recommend reading credello’s debt guide. It’s a comprehensive guide on what debt is, how to identify good debt and bad debt, and what to do when you need to get out of debt. We’ve also made a list here of five personal finance concerns that you should deal with immediately, with some tips on how to address them.

These Personal Finance Concerns Should Be Adressed Soon

1. Late Or Missed Payments During The Past Two Years

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The official “start” of the Covid-19 pandemic in the US was January 21, 2020. That’s when the CDC confirmed the first coronavirus case inside the United States. By April, businesses were shutting down and workers were being sent home, either laid off or to work remotely. The unemployed received government assistance but remote workers weren’t so lucky.

The six months of financial uncertainty that followed caused a lot of folks to accumulate more debt and miss payments on existing debt. If that’s your story, you need to address it right now. According to Equifax, missed and late payments can stay on your credit report for up to seven years. You can’t change the past, but you can make your payments on time going forward.

2. Celebratory Spending As The World Reopens

The Amazon “One Click Buying Button” is not your friend. It’s a convenience when you need to buy something, but it eliminates any chance of buyer contemplation before you make your purchase. Many online platforms have installed similar features this year, knowing that compulsive consumer shopping behavior will drive sales.

People are back to work. Stadiums are filling up for sporting events, concerts, and shows. Brick and mortar retail stores, what’s left of them, are having massive reopening sales to entice customers back through their doors. Consumers are spending because they can, not because they must. That’s a habit you’ll want to put in check, and fast. Prioritize savings overspending, especially impulsive, “celebratory” spending.

3. Excessive Credit Card Debt And Credit Usage

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This is not a problem unique to the pandemic, it’s an American dilemma. The most recent Federal Reserve Survey of Consumer Finance reported that the average US family carries credit card debt of $6,270. The average interest rate on that debt is 15.91%, so Americans are paying, on average, at least $1,000 a year in interest alone. This is an area you’ll want to address.

Another issue with high credit card debt is your credit usage rate. Generally displayed as a percentage, it’s the amount of available credit you’re using. Maxing out your cards puts that number at 100%. Credit scoring agencies, like FICO, prefer that it be less than one-third of that. That’s why “amounts owed” are counted as 30% of your overall FICO score.

Maintain a low level of spending on your credit cards and pay them off in full every month to avoid falling into deeper debt and hurting your credit score.

4. Having No Cash Reserves (Emergency Fund)

Spending your emergency fund during a pandemic is okay. Not replenishing it once the crisis is over is a mistake. Now is a good time to implement a savings strategy to make sure you’re not caught short when the next crisis occurs. Life still has its ups and downs. People get sick. Accidents happen. Homes need repairs. That’s what an emergency fund is for.

One technique to replenish your emergency fund is the “10% Rule.” Put aside 10% of your gross income every pay period and earmark it for savings. This strategy is normally used for retirement accounts, but you can certainly set aside some of that money to build your emergency fund back up as well. Ideally, you’ll want to save enough to cover six months of expenses.

5. Cash Flow Problems Due To Poor Budgeting

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Failing to follow a budget will eventually result in cash flow problems. People far too often try to control their spending by instinct, a strategy that often leads to failure. Seeing your income and expense numbers on paper (or on-screen) can help you organize your spending, so you don’t get into debt. It can also help you hit your savings goals.

There’s a rule for this also. It’s called 50/30/20. When you set up your budget, separate expenses into “essential” and “non-essential” categories. The essential expenses should add up to no more than 50% of your total income. Non-essentials are 30%. The remaining 20% is for savings and investments. Try it for a while. Your personal finances should improve.

The Bottom Line: Challenging Times Require Careful Financial Planning

We may have weathered the worst of the storm, but the full extent of the damage is yet to be revealed. There’s already some indication that the stock market is due for a major correction soon. Inflation is still rising, so prices are going up. Interest rates will also go up sometime next year, a situation that will make it more expensive to buy big ticket items.

Challenging times require careful financial planning. You don’t need to hire a professional to do that, but it wouldn’t hurt if you can afford one. A financial advisor or CFP can help you make the right decisions for investing and retirement planning. That knowledge is worth the price you pay for it. You’ll just need to make the commitment to find someone you trust and follow their advice.

There are many reasons to be optimistic about what will happen in the next few years. Covid-19 is still around, but the worst of the pandemic is over. It’s time to pick up the pieces. Start by addressing your personal finances. During the darkest days of 2020, some believed we had no future. We do. Plan accordingly and yours could be a bright one.

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