The sudden onslaught of the pandemic has taken a toll on many businesses. Those struggling to manage their finances were particularly thrust in an even more challenging position because of the season.
Conquering the uphill climb to financial freedom begins with small steps. It may seem overwhelming, but the earlier you act upon it, the earlier you will be able to manage all your debt.
The Consequences of COVID-19
With COVID cases reaching 21 million in the United States alone, the economy has inevitably suffered. A study from the University of Southern California found that net losses due to the pandemic could result in up to $4.8 trillion for the gross domestic product of the United States in the next two years. The U.S. then ended the previous year with 9.4 million fewer jobs.
On the effect on citizens, a study by Northwestern Mutual 2020 Planning & Progress says that 84% of adults in the U.S. expect the pandemic to be a barrier to long-term financial security. Despite this, however, 83% remain optimistic that they will eventually regain security with time. 47% also believe that economic growth can be achieved again within a year.
These statistics show that Americans have met the devastating effects of the virus with resilience. Despite the rising unemployment rate financially stunting millions of lives, many continue to live with its effects hopeful of recovery in the future.
Steps to Recovery
There are still ways to regain control of finances amidst the challenges of the pandemic. Consider these steps carefully as you manage debt during this time.
1. File for bankruptcy when necessary.
Severe financial crises can make filing for bankruptcy practical for certain individuals. Many do not opt for this without recognizing that this may be the best option to take on economic distress brought on by the pandemic.
Filing issues an automatic stay that prevents debt collectors from demanding payment. This doesn’t cancel out your debt, but it does suspend collection until your case is finished. If a creditor attempts to collect money from you during this time, the court can demand a fine.
Bankruptcy is difficult to work out on your own, so hiring a bankruptcy attorney to walk you through this process is highly recommended. Your lawyer can handle the legal aspects of your case, and can keep the whole ordeal quiet if you are uncomfortable with speaking about it.
Be aware that bankruptcy significantly affects your credit score and will stay on your record for seven to 10 years. Remember, too, that filing it enables you to rebuild your credit sooner than later.
2. Pay bills on time.
Late payments stay on your credit report up to seven years after you make them. Deal with your dues ahead of time to prevent penalty fees that will negatively affect your credit score. Set up automatic payments on bills to avoid these issues in the future.
3. Work from within a budget.
This goes without saying for any person, even those who are not necessarily in debt. Operating from a strict budget may be the secret to getting you out of debt more quickly.
When money is tight, take time to evaluate the necessity of amenities that you have. You can lower your Wi-Fi or cable plans. Maybe cooking food at home will be financially wiser than ordering takeout on some nights. These little changes can build up to bigger savings, making it easier to make on-time deposits on bills.
4. Take credit counseling.
Credit counselors come from non-profit organizations. They can provide free consultations to help you understand your financial situation and decide on the best action plan. Some fees may be required later on, depending on the services you will avail of.
Prepare and look over your financial documents ahead of time to help your counselor have a clear picture of your status. You don’t have to be struggling financially to seek out these services. Credit counseling is a budget-friendly means of getting a good handle of your finances.
5. Monitor your financial statements.
There are times when debt is aggravated by discrepancies in bills, insurances, and credit reports. Diligently review these documents and dispute any missing information that you notice. While doing this, however, take note that some payments can take weeks to reflect on your statements.
The journey to financial freedom is a steep, difficult climb, especially in the time of COVID. Being honest about the struggles of managing personal and business finances in a pandemic is a small decision that will have great effects on how well you will manage hurdles that will come along the way.