When the world closed down a year ago, businesses faltered, and many found themselves on the receiving end of job cuts or dwindling income. Millions of Americans have suffered financially during the last year due to hardships brought on by the pandemic. In fact, a Pew Research Center Review reported that roughly four in 10 Americans say they have taken a pay cut, been laid off, or live with someone who has been laid off since the start of the pandemic.
But there is a light at the end of the tunnel—you can get your finances back on track. Like many, you may be looking forward to a tax return and the American Rescue Plan stimulus check. But before you apply it to debt, keep in mind that if you’re struggling with household costs like food, utility bills, repair needs, or regular debt payments, you should seriously consider diverting funds toward those everyday expenses.
The best way to begin deciding where you want to apply these funds is to sit down and get an overview of your expenses and then make a budget. To free up additional cash flow, it’s always a good idea to cut household costs where you can so that money can go toward debt repayment. Financial experts advise that extra revenue streams can also be diverted toward an emergency fund, so that if you lose your job or income, you have a backup to hold you over until you can get back on your feet.
At the same time, it’s important to get your debt under control. So, as long as your household is taken care of, you can now decide whether applying your stimulus check and/or tax refund to high-interest debt is a good financial move. The answer? It is. Paying toward your debt will help you ultimately get out of debt quicker and will eventually allow you to divert cash to other expenses in your life.
If even after these additional short-term revenue streams haven’t helped you alleviate your debt burden to a manageable degree, you might want to look into seeking help through a debt management plan. Credit counselors will work with you and your credit card companies to consolidate your debt, lower your interest rate, and create a monthly payment that is affordable and customized to your specific situation.
The pandemic will come to an end, and by utilizing additional cash streams, following a careful budget, and seeking credit counseling help when you need it, you will emerge financially more secure with a better grasp on how to manage your personal and fiscal health.