Organization is key as Americans work to recover during the economic downturn.
April is National Financial Literacy Month, a month dedicating to raising awareness about the importance of financial literacy.
“Now more than ever, we’re seeing how crucial it for Americans to understand personal finance so they can navigate financial crises effectively,” says Gary Herman, President of Consolidated Credit. “The past year has shown us that financial fundamentals like budgeting, having a robust emergency savings fund, and keeping credit card debt minimized are essential to maintaining stability.”
While the past year has been tough on people’s finances, most people are feeling positive about their financial prospects in 2021. Consolidated Credit polled 1,000 adults to ask about their financial outlook and 93% reported that they were optimistic about their financial outlook this year.
However, the survey also revealed that people may be relying heavily on federal assistance to get ahead:
- 40% of those surveyed planned to use this latest round of stimulus to pay down credit card debt
- 27% will use it to catch up on past-due bills
- 29% will take advantage of the extra cash to pad their emergency savings fund
“These figures show that people are using their stimulus payments strategically to improve their financial situation,” Herman says, “and that’s critical given that we’re still in an economic downturn. Things are likely to recover this year as the country continues to reopen, but people need to get organized and focus on financial stability for their household in the interim.”
Getting organized to successfully navigate the coming year
Like many experts, Herman is concerned that the government’s efforts to sustain our economy may only be delaying financial crises for many American households.
“My concern is what happens when the government stops providing stimulus payments and ends programs like federal student loan forbearance and the foreclosure and eviction bans,” Herman explains. “I’m worried that we’ll see spikes in defaults, evictions, and foreclosures. People need to be using their stimulus, their tax refunds, and this time right now to get organized so they can avoid these kinds of devastating financial events.”
Consolidated Credit offers these tips for getting organized this spring to maintain financial stability throughout the rest of the year and beyond:
1. Take complete stock of where your finances stand now
The first step in getting your finances organized for spring is to take stock of where you stand. Revisit your budget—or if you don’t have a budget, take some time to make one.
You should also take time to review all your debts, bills, and obligations. You want to know exactly:
- How much you owe on each account
- What’s current and what’s past-due
- How far past due bills are and how much you will need to catch up
Consolidated Credit has a series of free worksheets that can help you get organized:
2. Pay attention to when federal protections run out
It’s important to stay updated on when federal protections and relief programs will expire. This list can help you get started:
- Income taxes are now due on May 17, 2021
- The foreclosure ban on FHA and USDA home loans will expire on June 30, 2021
- The eviction fan on Fannie Mae and Freddie Mac rental properties will also expire on June 30, 2021
- Federal student loan forbearance and the interest freeze on federal student loans are both set to expire on September 30, 2021
Be aware that these protections may be extended, but don’t count on another extension. Be proactive so you’ll be prepared if those extensions don’t come.
3. Take advantage of any government assistance while it’s available
Your 2020 income tax filing is your last opportunity to claim funds you were eligible to receive from the first and second round of stimulus. You can use the Recovery Rebate Credit on your tax forms to claim any money you did not receive. That includes the $500 payments from the first round of stimulus for dependents under the age of 18.
The federal government has also provided $25 billion in rental relief funds to state, county, and municipal agencies throughout the U.S. If you are behind on rent payments, contact a HUD-certified housing counselor in your local area or call 2-1-1 to find programs that may be available to help you catch up.
For homeowners, the deadline to request an initial 180 days of forbearance will happen on June 30, 2021. If you have any concerns between now and then that you will fall behind on your mortgage payments, take advantage of this federally-protected forbearance period now. You can also request an additional 180 days of forbearance after that, but the first forbearance request must happen before the end of June.
4. Don’t wait to make arrangements that will aid your recovery
“People need to start communicating with lenders, creditors, and landlords now to prepare for when payments will start again,” Herman encourages. “Don’t hide from the servicers that administer your accounts. Banks, lenders, landlords, and financial institutions all want to help their customers avoid the worst outcomes.
“Contact them now to start working out payment plans and to understand what will happen once forbearance and deferment periods end. Even if you can’t pay everything you owe immediately, showing them that you want to work with them to find a solution can go a long way.”
- Review your budget to see how much you can afford to pay if you are behind
- Ask providers and servicers how quickly they expect you to catch up
- Negotiate to work out a repayment plan on each debt or bill that will allow you to catch up
5. Build financial literacy so you’re better equipped to maintain stability
“This pandemic has certainly been a black swan event that no one could have predicted,” Herman says. “But financial downturns and household emergencies are inevitable. You need to plan and prepare your finances for the worst, so you can maintain stability in any situation that may arise. The more you know and the more you use that knowledge, the better prepared you will be when something like this happens.”
Consolidated Credit offers free financial education resources that can help you get started. We also have resources that can help you plan for major life events—both those that are expected and the unexpected.
We also have a free webinar on-demand that can help you set a financial spring cleaning plan:
Finally, whether you’re ahead or behind, take steps to eliminate any credit card debt that you may be carrying. According to our financial outlook survey, people with over $2,500 are less likely to have an emergency fund. Don’t let debt hold you back from building your financial safety net. Set a debt reduction plan or talk to a certified credit counselor to find solutions that can help you pay off credit card debt faster.