Organizing your financial life in 2021
There’s no doubt about it. The coronavirus pandemic has impacted the financial lives of Americans throughout 2020.
In fact, you don’t have to look very far to find proof. According to a recent CNBC survey:
- 53 percent said they’re worried about the current economy;
- 26 percent said they experienced a loss of household income;
- 16 percent feared another stock market downturn; and
- 14 percent lost their jobs.
And as the pandemic continues, with more lockdowns, curfews and business restrictions, there is still economic uncertainty. But while you may have put some plans on hold, try not to let the disruption completely change the long-term goals you may be working toward, like planning for retirement, buying a home or saving for college.
As 2021 comes into view, take the opportunity to get organized. Assess where you are, make necessary adjustments, rethink your budget and if you can, step up your savings.
Where to start?
Find a workable balance between reducing debt and continuing to save with these practical steps:
First, get your debt in line.
If you have mortgage, loan or other types of debt, look for ways to lower your monthly payments.
- Refinance your mortgage.
The mortgage industry is still experiencing historically low interest rates, despite the uncertain economy. If you qualify, you may be able to lower the interest rate on the outstanding principal that you owe or refinance over a longer term to reduce the amount you’re paying each month. (Many banks can help you accomplish everything by phone or online for a safe and easy experience.)
Generally speaking, if the new interest rate can save you the cost of refinancing in one year, you should probably refinance. For example, a 1% difference in your interest rate on a $100,000 mortgage could save you $1,000 in the first year. Check with a mortgage professional who can run the numbers for you and see if this may be an option to lower the amount of your payments.
- Consolidate other types of debt.
If you are carrying balances on high-interest credit cards every month, you may be able to consolidate this type of debt and pay off what you owe at a lower rate and with a single monthly payment. Especially since average interest rates on home equity loans/lines of credit or personal loan products are currently lower than the rate on many credit cards. Check with your local lender.
Better still, if you are a Webster Premier Checking Account customer, you can get bonus discounts on already low or discounted rates on loans which can help you lower monthly payments even more as well as provide other attractive benefits.
What you should know
- Be diligent about making credit card payments. Missing a payment can damage your credit score for a long time... and derail your other long-term financial goals.
- Pay attention to payment due dates. If you miss a payment and double up the following month, you’re still 30 days late. On top of that, you’ll be hit with a late fee…which, according to U.S. News & World Report, now averages $36.
- Understand credit scores. The credit score you can pull from different service providers is not the same one lenders use to determine your creditworthiness. They use more specific industry credit scores which are customized for the level and type of debt you may be applying for.
- Check your credit report for errors. CNBC reports that more than one in five consumers have "a potentially material error" in their credit file — a mistake that makes them seem like a bigger risk than they actually are. You can check your credit reports at www.annualcreditreport.com.
- Seek financial relief.
Although a new round of financial relief from the federal government has not yet been announced, many banks are offering programs that can allow you to modify payment terms and schedules that can help during this pandemic. For example, Webster Bank offers programs that include:
- Increased, individualized debit card spending limits
- Waived penalties for early CD withdrawals
- Increased, individualized remote deposit limits
- Options for payment deferrals on existing mortgages, home equity or personal loans and small business loans, based on situation
- Moratoriums on foreclosures
Next, keep your savings on track
Although the pandemic has disrupted current work/home lives, it may not have completely impacted long-term goals. Now is a great time to review your goals in light of the ongoing challenges that may continue into 2021.
- Review your plan.
If you have a financial plan, stick to it. Uncertainty and fear are not good reasons to change a financial plan. Rather, they’re the reasons why you put together a plan in the first place.
- Pay attention to data.
Not headlines. Even though some of the data may seem scary, it gives you more information and the more information you have, the less scary all of the uncertainty seems.
- Understand normal economic cycles.
Keep in mind that recessions, in general, are a normal part of economic cycles. They begin and end. The only new aspects of the current event-driven recession are 1) it stems from an illness, 2) the government’s response to it and 3) its worldwide impact.
Finally, seek financial advice from a trusted advisor
Even in a time of social distancing, your local bank can help you gain more control over your finances. For example, at Webster Bank, you can get a Financial Check-up. By phone, a specialist will review your situation and guide you to the best solutions.
Using these few tips, you’ll gain better control over your finances and have greater confidence for achieving your goals in the future.
All loans and lines of credit are subject to credit approval.