Tips for Staying Afloat During the Pandemic
Just starting your journey to financial wellness? These steps will help you weather uncertain times.
During uncertain times, being in a good place with your money can make a huge difference, both now and in the future. Hawai‘i is already well-known for its high cost of living, and the COVID-19 pandemic has added to financial hardships for residents with a higher unemployment rate, decreased household income and significant stress over making ends meet.
While some may already be savvy with their finances (if you are, great job!), COVID-19 is making many of us realize just how important it is to start managing our money. If you’re just starting on the road to financial wellness, these tips can help keep you on the right path.
1. Keep track of your money
Pandemic or not, it’s always good to know how much money you have and where it’s going. Start by figuring out how much you need to cover your very basic needs: rent or mortgage, internet, electricity and household supplies such as paper towels, laundry detergent and toilet paper all count.
“Budgeting is always a great place to start,” says Tafiti Uso, vice president and team leader of private wealth management at First Hawaiian Bank. “And there are lots of tools that can help make it easier to keep track of your spending.” First Hawaiian Bank customers, for example, have access to financial management tools in FHB Online & Mobile Banking.
2. Set aside an emergency fund
Now that you know how much you need to cover your bare necessities, the next step is to start building your rainy day fund. As tempting as it may be to put this off, especially if bills eat up most of your paycheck, don’t: “After keeping track of your money, this is one of the most important steps,” says Uso. “An emergency fund isn’t just for unemployment, it’s also for sudden medical expenses as well.” The general rule of thumb is three to six months’ worth of living expenses; look for a high-yield savings account, which has better interest rates than a typical savings account.
3. Prioritize expenses
Right now, it’s more important than ever to be mindful of your spending. Expenses can be broken down into two categories: fixed/necessary (this includes your living expenses and bare necessities) and discretionary (these are things you don’t necessarily need but are nice to have). Always make sure your fixed expenses are covered and limit your discretionary spending as much as possible. If you can afford to keeping paying down your debt and still make ends meet, then continue to do so as much as possible.
Discretionary expenses are often based on emotion, like treating yourself or panic-buying cases of hand sanitizer, or convenience, like shopping at the closest grocery store even though it’s more expensive. Before you pull out your credit card to buy something, ask yourself: “Is this something I need, or something I can live without? How much use or value will I really get out of it?” Prioritizing is all about choice—instead of ruminating on all the things you can’t buy, think of it as putting your hard-earned money toward something way more valuable: yourself.
Where you spend your dollars matters almost as much as what you choose to buy. When you do shop, consider supporting local businesses and brands. Those purchases will do much more for your community by helping local businesses owners, who, just like you, are trying to stay afloat during the pandemic.
4. If you own a home, look into refinancing
In case you haven’t heard: mortgage rates are really low right now. “And they will continue to remain so for probably the next few years,” says Uso. “So, if you do own a home, this is absolutely the time to consider a refinance.” If you want to talk numbers, consider this scenario: Say you bought a place last year and your mortgage is $280,000, or $1,337 per month, with an interest rate of 4% and a 30-year term. Refinancing for a new 30-year loan with a 3% interest rate—just 1% less—will bump your monthly payment down to $1,160, saving you $177 a month, or $2,124 a year. However, note that effective Dec. 1, Fannie Mae and Freddie Mac will impose an adverse market fee of 0.5%, which will increase refinance costs for homeowners.
Keep in mind that refinancing does come with closing costs, such as application, loan origination and appraisal fees. And everyone’s situation is different; depending on your loan amount, interest rate, term and the year you bought your place, it may or may not make sense for you. Use First Hawaiian Bank’s mortgage calculator to get an idea of what refinancing could mean for you.
5. Keep your health in check
Know the saying “health is wealth”? While it might not lead to a raise or bonus, staying on top of your physical and mental health benefits your financial health by preventing disease and lowering expenses. But most of all, taking care of yourself now means more opportunity, and more financial means, to enjoy life after the pandemic is over.
Reduce stress – Chronic stress can lead to serious physical and mental health issues, so exercise, practice meditation, rant to a friend—whatever works for you.
Go outside – It’s easy to stay home when you have nowhere to go, but try to get yourself outside, even if it’s just for a few minutes. Sometimes a little sunshine, change of scenery and fresh air are all you need to lift your mood.
Stay in touch – Since we can’t be physically together, it’s more important than ever to make an effort to connect with our loved ones. Remember to check in with your family and friends, and always know that you’re not alone, even if you’re apart.
It never hurts to get some professional guidance. If you’d like some help with meeting, or even making, financial goals, consider bringing a financial planner into the loop. A financial planner will collect all your financial information—salary, debt, bills and any additional income—to come up with a plan to help you get to where you want to be. They will be able to identify any gaps and find solutions to make sure you’re getting the most out of your money. Financial planners will meet with you consistently to make sure you’re on track and adjust your goals as needed.
A good place to start is to meet with a Financial Planning professional. First Hawaiian Bank offers a complementary financial review from their team of Wealth Advisors. They have an in-house team of financial specialists to help clients stay on track throughout the pandemic. To learn more about First Hawaiian Bank’s financial planning services, visit https://www.fhb.com/en/wealth-management/planning/ or to request a financial checkup, visit https://www.fhb.com/en/financial-checkup/.