5 ways to rebuild your finances
Although the pandemic quickly upended the economy and the finances of millions of workers, both are gradually recovering. Now is a great time to reassess your situation and take steps to get back on track. Consider these five actions:
1. Rebuild your emergency savings.
Ideally, you should try to maintain at least three to six months’ worth of living expenses in an interest-bearing account that you can tap into during unexpected events, such as a job loss. If you drained your emergency fund — or didn’t have one — gradually build up savings.
In a study by MissionSquare Research Institute (formerly the Center for State and Local Government Excellence at ICMA-RC), of public sector workers:
- 41% said they and their families have been negatively impacted financially by the COVID-19 pandemic
- 31% have had to take on more debt since the start of the pandemic
- 38% of those with an emergency fund have had to spend money from it during the pandemic to make ends meet
Whether you’re worried or just want to confirm you’re heading in the right direction, we can help. Firm up your finances with easily accessible tools in our Financial Wellness Center — created to fit your specific goals. Log in to your account to get started.
2. Tackle your credit card debt.
Americans overall have reduced their credit card debt since early 2020, but a recent Bankrate survey found that four out of 10 consumers added to their card balances during the pandemic.
You can save on interest by paying extra on the card with the highest interest rate. Once that card is paid off, apply extra payments to the card with the next highest rate, and so on.
If your debt is more than you can comfortably handle, ask your card issuers about hardship repayment plans. Check out our debt calculator for other strategies.
3. Budget for repayments.
Early in the pandemic, the government suspended payments on federal student loans, and it offered forbearance on federally backed mortgages to borrowers impacted by COVID-19.
Student loan payments are set to resume after Jan. 31, 2022. Uncle Sam offers a variety of repayment options for those who may have difficulty making payments. Check out: Get Ready for the Return of Student Loan Repayments.
Mortgage forbearance could last as long as 18 months, depending on when you applied. If yours is about to end, and you think you’ll have trouble restarting payments, contact your mortgage servicer to review your options. Or seek advice from a federally approved housing counselor.
4. Check your credit report.
Consumer complaints about credit reports more than doubled in 2020 to 279,200, and most of them were about inaccurate information, according to the Consumer Financial Protection Bureau (CFPB). Credit report errors can lead to you being denied credit or charged a higher interest rate on loans or credit cards.
You’re entitled to a free report weekly from each of the three major reporting companies — Equifax, Experian, and TransUnion — until April 20, 2022, at www.annualcreditreport.com.
Thereafter, get free reports annually. Dispute any errors with the reporting companies, which must investigate your claims. Follow these steps from the CFPB on how to get mistakes fixed.
5. Get your retirement savings moving again.
Among workers who made changes in 2020 to their workplace retirement plan, 23% stopped contributing, while another 22% reduced contributions, according to the Employee Benefit Research Institute.
If you reduced your contributions, catch up by restoring your prior contributions or even increasing them. If that’s still a stretch, you can gradually raise your contributions by 2-3% each year until you reach your target.
If you took a withdrawal, plan to repay what you can. In 2020, those under age 59½ were allowed to take penalty-free withdrawals of up to $100,000 from IRAs or, if their employer permitted, withdrawals from 457 and similar workplace retirement plans (taxes still applied). You can take up to three years to restore the funds to retirement accounts and recoup any taxes paid.
Learn more by contacting your MissionSquare Retirement representative for answers to your questions about your financial goals.
Please note: The contents of this publication provided by MissionSquare Retirement is general information regarding your retirement benefits. It is not intended to provide you with or substitute for specific legal, tax, or investment advice. You may want to consult with your legal, tax, or investment advisor to review your own personal situation. Some of the products, services, or funds detailed in this publication may not be available in your plan. This document may contain information obtained from outside sources and it may reference external websites. While we believe this information to be reliable, we cannot guarantee its complete accuracy. In addition, rules and laws can change frequently.