By George Mscauoette
In today’s unstable economy, it can be hard to think beyond your next paycheck. The idea of trying to pay off debts or build up savings may seem like a far-off dream. But there are still steps you can take to improve your financial standing while waiting for the economy to calm down. While you likely won’t see large goals like loan payoffs within 2023, you can set yourself up with a strong foundation to start tackling larger financial goals.
First, build an accurate picture
With the fatigue and stress plaguing many American families, it’s easy to want to put your head down and focus on the next bill in front of you. But to start building your foundation, you need to see what you have to work with. Whether you are familiar with Google Sheets and Microsoft Excel or get tips from YouTube, set up a budget sheet that allows you to track your monthly expenses and income as well as annual payments like subscription fees. Once you have a clear picture of your month and when things come due, you can start planning on your long-term plan to be debt free.
Another thing you can do with that workbook is create a priority list for large expenses. List the expense and what it costs, and then order them by priority. This will help you track your goals so you can start saving a little bit here and there toward them.
Take advantage of helpful repayment plans
One thing on everyone’s minds is student loans. Payments are set to restart, and people are understandably panicked. With layoffs seemingly around every corner and inflation appearing unstoppable, the last thing people want to think about is more payments. Despite the Supreme Court and the Biden administration's current disagreement, the Education Department is implementing strategies to help borrowers ease into payments and to reduce payment amounts.
Remember that budget sheet? Start collecting your utility statements and other proof of expenses, and then get ahold of your federal student loan servicer and talk to them about getting set up for SAVE. SAVE is an Income-Depended Repayment Plan that sets your monthly payment to 5% of your discretionary income— that is, income after necessary expenditures. This is one of the best repayment plans available if you are on a tight budget, and you’ll have a year to work the monthly payments into your budget. Try not to take the full year, as your interest will be compounding in the meantime.
You should also talk to your servicer about debt consolidation. For a limited time, you can consolidate loans even if they were on an IDR without taking a penalty to accumulated forbearance/deferment time put towards forgiveness.
Start building up your credit
Your credit score affects your entire financial situation. It determines if lenders are willing to work with you and at what interest and payment rate. You need good credit to get good financing on things like cars, homes, and other large expenses. Your kids need good credit to prepare for independence. And in this financial atmosphere, building credit can sound impossible. But there are companies out there who want to help.
One option is to sign up for a Varo Believe card. These credit cards are specially designed to help people reclaim their credit scores while learning healthy habits. It’s important that you don’t set a limit above what you can spend. Instead, use the Believe card for your monthly expenses, and then transfer the money you would have used from checking to pay the card instead. By making consistent monthly payments on time, you’ll start improving your credit score. The great thing about these cards is they don’t trap you with high-interest rates or fees; instead, they simply require you to be a Varo banking customer.
Model healthy financial habits
Learning to find the best financial route has more benefits than helping your family become debt-free and reach financial independence. It also sets a good example for your kids. Learning financial literacy is important to help them prepare for their future, especially if they decide to pursue a college degree and have to take on their own student debt. Let your kids join you when looking over the budget and setting up payment plans or a Varo account. Talk to them about what certain financial terms mean, and help them understand the importance of finances and how you all can work together to take steps towards a brighter future. When the time comes for them to start working or filling out student loan applications, offer to sit with them and help them understand what they are looking at, but don’t do the work for them. The same goes for taxes. You want to set your kids up for success, and that includes ensuring they know how to handle their own finances and have healthy financial habits. We hope the above tips help you find steady ground in the turmoil of 2023, and wish you success in building your financial future!
