Online lending marketplace LendingClub recently released tips for staying financially healthier in 2021.
Eleven years after the Great Recession technically ended, many Americans are still struggling financially and the COVID-19 pandemic has only made things worse. According to the Financial Health Network, in 2020, the majority of people in America (67 percent) are not considered financially healthy. With little financial cushion, many Americans are struggling to build savings and plan for their futures.
“As a vaccination program starts to roll out across the country, we should get closer to our pre-pandemic lives in 2021 but that doesn’t mean we should get back to old financial habits,” said Anuj Nayar, Financial Health Officer at LendingClub. “Many Americans have seen reductions in income and are saddled with unforeseen expenses as a result of this pandemic. It’s time to get back to basics so we can emerge from this crisis financially stronger.”
LendingClub is committed to helping borrowers improve their financial health, especially during the COVID-19 pandemic. For a financially healthier 2021, Anuj Nayar recommends to:
- Take stock of your financial life. Look at your spending habits and identify if you are living within your means. A critical part of financial planning is identifying if you are spending less than you are making. It’s also important to make sure you’re paying off bills on time and in full. If you are doing this already, you’re on the right track to a healthier future.
- Create a budget every month and stick to it. Budgets can be simple to reflect short term goals or more advanced to project over a longer period of time. The important thing is to identify how much you’re spending on basic needs (like food, shelter, clothes), discretionary categories (like dining out and shopping) and how much you’re stashing aside for savings every month. Plus, a budget will help you from impulse spending that could get you into a debt trap.
- Identify ways to save. It’s important to have sufficient living expenses in savings that you can draw from in case of an emergency and have sufficient long-term savings that you do not touch. If you haven’t started a habit of saving, set up an automatic disbursement so that part of your paycheck every month goes automatically into savings. If the money is out of sight, you might be less tempted to spend it.
- Decrease your overall debt load. In 2019, Americans carried an average personal debt of $90,4602 and, while overall credit card debt has dropped in 2020, many people are still unable to pay their bills in full. To decrease your overall debt load, consider consolidating your debt or refinancing it through a lower cost personal loan to pay it off responsibly.
- Borrow responsibly. It’s important to make sure you don’t over-lever yourself. While credit cards are great for convenience, they’re a horrible way to borrow money. Credit cards are basically a high-interest loan that can become challenging to pay back. This can lead to a decline in credit scores and in some cases a revolving debt trap. Only swipe if you intend to pay that purchase back in full when your bill arrives.
- Plan and invest in your future. If you’re at the stage where you’ve managed the above, start investing in yourself and your future. Consider working with a financial advisor to understand your investment options, identify any life insurance needs and start estate planning.