How Has COVID-19 Impacted Savings?
Amidst the beginning of the Coronavirus pandemic, the U.S. personal saving rate grew from 12.7% in March 2020 to a record 32.2% in April 2020. Clearly, Americans who hadn’t lost their jobs were socking extra money away as an uncertain future loomed. Nearly a year later, we’ve all learned the importance of having a robust emergency fund. Unexpected medical bills can appear in the mail, jobs can disappear, and unemployment benefits can take a while to kick in. With three, six, or 12 months of living expenses in the bank, you’ll be better prepared to deal with whatever life dishes out. Keep reading for tips on breaking the paycheck to paycheck cycle, taking small steps toward building savings, and taking your finances to the next level.
What if I’m unemployed or living paycheck to paycheck?
First, we want to acknowledge the genuine financial hardships people have experienced during the pandemic. If you are unemployed right now or living paycheck to paycheck, it may be difficult or even impossible to save. While Iowa’s seasonally adjusted employment rate
was lower in December than November and, at 3.1%, is less than half the national rate of 6.7%, it’s still higher than the 2.8% of a year ago. So, more people are out of work and may be living on a reduced income. Or, you have work but can’t seem to break the paycheck to paycheck cycle.
Where there is no “magic bullet” solution, we encourage you to start small. Here are a few ideas:
- Get clear on where your money is going. You may feel like most of your paycheck goes to rent, childcare, or another monthly expense, but it helps to break down every dollar. Keep a list of everything you spend money on in a month. Use that list to create a working budget, if you don’t have one already, so you can continue to categorize and record spending.
- Look for an easy win. Are there any small expenses you can cut, such as an app subscription you forgot you had? Identify at least one thing and re-direct that money to your savings account. Even if it’s only $5/month, it’s a start. That initial win will give you momentum and confidence to keep going.
- Build your resume. Whether you’re currently unemployed or just wish you had a higher paying job, research the skills you need to level up. You may be able to learn some of those skills for free on the Internet and add them to your resume. Additionally, the IowaWORKS Centers provide a number of benefits including no-cost training and workshops, training certificates, career and skills assessments, and more.
- Get a side hustle. Can you work a few hours a week as a babysitter or dog walker, sell homemade goods on Etsy, or otherwise leverage your hobbies or skills into a side income? Put whatever you earn from your side hustle into savings and watch it grow.
It may take time to build your savings and break the paycheck to paycheck cycle but if you take that first small step, know that you’re on the right track.
Level up your finances
If you’re not in the situations described above, you may think you’re doing “just fine” with saving and budgeting. However, a closer look may reveal opportunities for improvement:
- How often do you make impulse purchases? We’re all spending more time at home now, it’s easy to order stuff online, and it’s easy to buy stuff out of boredom or in response to a sale. Just try to notice this and, if you catch yourself, redirect that amount into savings instead.
- Are there budget categories you can trim? Perhaps you’ve been saving money in certain categories, such as transportation or travel, simply because of the pandemic. Take a hard look at the rest of your budget and see if you can shave off a little here or there. Don’t be so Draconian you won’t stick to it but do see if you can reallocate some money to savings.
- Look to the future. In addition to saving for emergencies, do you have other short-term savings goals, such as a down payment on a house or a child’s college education? What about retirement? It’s never too late to start saving for short and long-term goals!
- Get rid of debt. Think of debt as the weeds growing in your garden, choking out the flowers you actually want to see grow. While some debt, like a mortgage, doesn’t necessarily need to be paid off early, credit card balances, student loans, and other types of non-housing debt should be paid off as aggressively as you can. Just think--with each debt payment you eliminate, that much more can be allocated to savings.
Learn more about savings account options from LSB!
Are you ready to build or rebuild your emergency savings? To level up your finances? We offer a variety of savings accounts
for adults, children, retirement, and healthcare costs. Open a new account today or contact us
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