By Nereida Choate, Bank of America Bakersfield Market Leader and Arleana Waller, Founder, MLK commUNITY Initiative
In vulnerable and underserved areas such as Southeast Bakersfield, we’re seeing these communities be disproportionately impacted by the coronavirus – health-wise and financially – with layoffs or furloughs, medical and other bills leading to increased levels of worry. It’s no wonder that we are hearing from more and more people who share with us that they are stressed about their finances.
To help alleviate and reduce financial stress, MLK commUNITY has invited our local Bank of America leaders to provide free financial education to community members. We agree that now may just be a great time to ‘reset’ your finances by examining your situation, redefining your goals and creating a plan that sets your family up for financial success for years to come.
Our eight-week virtual weekly workshops will start August 20 and cover a range of topics to create better money habits, especially in these unprecedented times.
Here is a sneak peak of the types of tips we will cover that can help you jumpstart that process:
Step 1: Understand Financial Stress
Managing your finances, especially during challenging times, can be stressful. But if you break it down, you’ll quickly see that financial peace of mind comes from having a handle on several small (and very manageable) aspects of your finances. Start by listing out your finances – income, spending, saving, rent, mortgage payments, credit card debt, etc. – and prioritize which items need your attention first. Then, seek tools and resources that help you along the way. Tools like the Bank of America Savings Calculator can help you calculate how long it will take you to reach a specific goal.
Step 2: Revamp Your Budget
Unexpected situations triggered by the coronavirus pandemic may require that you rework your budget. The monthly budget is the single most important tool for staying on track, keeping you accountable to your financial plans and helping you reach your goals. Start by identifying all fixed expenses, considering how those may have changed in the past several months and forecasting where they will land when things return to normal. Then list all variable expenses, adding everything from birthday gifts to anticipated home repairs, so every dollar has a job. If necessary, adjust your variable spending so you are not spending more than you are bringing in.
Step 3: Lower Your Borrowing Costs
If a significant portion of your budget is tied up in loan payments, now is a good time to evaluate your borrowing and, potentially, reduce the amount of money you owe each month. With interest rates especially low right now, homeowners may consider refinancing their mortgage loans, particularly if they can reduce their interest rate by one percent or more. If you’re paying down a credit card balance, it may be worth exploring your options for a low-interest account. Depending on your credit, you may qualify for a credit account with zero percent interest on balance transfers, which could help you on your path to eliminating debt.
Step 4: Plan for the Unexpected
Even if your family hasn’t lost any income, these past few months may be a reminder of the importance of emergency savings. Additionally, conversations such as life insurance, disability insurance and retirement are likely to come up as you start thinking about your financial future. An emergency fund of up to six months of expenses can help bring peace of mind to families planning for their futures. Jump start your emergency fund by cutting a couple variable expenses from your budget and setting up an automatic transfer into a savings account, helping you avoid temptation. Further, review insurance coverage across the board to ensure it meets the needs of your family today, and for the next several years to come. These past few months have reminded us of the importance of being prepared for whatever may come our way. As you continue navigating this ‘new normal,’ you will find that small, simple changes can help you recalibrate your finances, plan ahead for your future and gain peace of mind in your financial life. For more in-depth resources on a variety of topics, visit www.bettermoneyhabits.bankofamerica.com. To sign up for MLK commUNITY’s financial education series with Bank of America, you can RSVP at firstname.lastname@example.org.