How to Get Back on Top of Your Family’s Finances After a Difficult Year

The pandemic has been difficult on all families for several reasons, but “trouble with finances” regularly sat at the top of the list. It was hard and often traumatic to create and maintain a home budget, invest money into your retirement, or top up your emergency fund during this time.

However, there’s always a light at the end of the tunnel. It’s still possible, no matter how bad things seem, to get back on track financially. You just need a solid plan and access to support.

7 Steps to Building a Post-Pandemic Family Financial Plan

Although looking at your finances will cause you stress, it’s very important that you assess your current situation. With this knowledge, you can build a nest egg and reach your financial goals.

Step 1: Review Your Total Household Income

The past few years may have been volatile on the income front, but you can start taking control of your finances when things settle down. Whether you have one income or two, determine your total monthly and annual cash flow right now. You can adjust this if your situation changes.

If you need to make more to survive (not keep the same lifestyle), look into part-time work or freelancing. Check if you can sign up for government assistance or another assistance program.

Step 2: Assess How You’ll Pay Off Your Debt

Mortgages, personal loans, credit cards, and lines of credit aren’t evil. When used properly, they can give you access to the things you need without going into debt. With that said, repaying your debt should be your top priority, as you could use those extra funds for something else.

In some cases, taking out a personal loan with a low-interest rate can reduce your monthly bills if you consolidate everything into said loan. However, if this isn’t possible due to your credit score, then focus on paying off high-interest debts first, like your credit cards or payday loans.

Step 3: Track and Reduce Your Fixed Expenses

So many “normal” costs, like commuting and childcare, have to be assessed when creating a budget if you’re going back to work. Be sure to include other fixed expenses, such as utility bills, subscriptions, car and insurance payments, phone plans, and groceries in your new budget.

While some things can’t be reduced or eliminated, plenty of other things can. For example, you can’t stop paying utilities, but you can sign up with another company for a better rate. Another example is the internet. Do you need especially high speeds when you don’t work from home?

Step 4: Deductions, Insurance, and Investments

Although tax deductions, insurance, and other investments don’t become relevant for at least a year, they’re still essential budget factors to consider right now. Many countries offer benefits for families, such as Child Benefits, which could give you more wiggle room in your budget.

Life insurance and health care are other important budgetary factors, as they prevent you and your family from paying more on necessities later in life. Finally, assess your retirement and other investment plans. Consider if you want to lower your overall risks or expand your portfolio.

Step 6: Consider Spending Goals and Savings

As a rule, you should plan for 6 to 12 months of emergency savings. That way, if someone loses their job, you have these funds to fall back on. While this is a great goal to set for most families, you should think about your other financial milestones, such as saving for a family vacation.

Start with big-picture, long-term goals. These include goals that are 5 years away, such as a major move, retirement savings, and postsecondary education. Mid-term goals are within 3 years, which could include buying a car. Short-term goals will happen within the next year.

Step 7: Carefully Monitor All Spending

The last and most crucial step involves actively monitoring your family’s spending habits. Use a financial tracking app, like one you get from your bank, to get a birds-eye view of your budget. First, check the app daily because you need to know if everyone is sticking with your plan.

You can take this step before creating a new budget if you feel you’re overspending. You may find that your daily ice coffee or cream-cheese bagel habit is costing you more than you thought.