The coronavirus has taken a significant toll on the U.S. economy as well as many Americans' personal finances. With more than 10 million U.S adults filing for unemployment over just the past two weeks, many people are struggling just to pay the bills each month.
If you're one of the fortunate ones who still has a source of income and doesn't have to worry about making ends meet, right now may be a prime opportunity to improve your financial situation. To make sure your financial future is as bright as possible, there are a few things you can do right now to build wealth. Here are three suggestions:
1. Try to increase your retirement fund contributions
Although it may not seem like it, right now is a good time to invest in the stock market. When the market is down, stock prices are at their lowest -- which gives you a great opportunity to buy low and sell high. The market will recover eventually, so by investing as much as you comfortably can now, you'll see significant gains later.
How much you should invest depends on a few factors. If your employer offers matching contributions through your 401(k) plan, aim to save at least enough to earn the full match. After all, those matching contributions are essentially free money, so it's wise to take full advantage of them.
In addition, make sure any cash you invest is money you won't need anytime soon. In other words, don't invest every spare penny if you're worried you may lose your job and need to pull your cash out of the stock market in the next few months or years. Because stock prices are so low right now, that means it's a good time to invest but a terrible time to withdraw your funds. So before you invest, make sure you're comfortable not touching that money for the foreseeable future.
2. Revamp your budget and cut any unnecessary costs
Even if you're not hurting for cash right now, it's never a bad idea to double-check that you're not wasting any money. Start tracking your spending if you don't already because that will give you a good idea of where every dollar is going. From there, you can comb through your expenses to see if there are any areas where you can cut back.
There's a good chance your spending may have decreased over the last few weeks if you've rarely left the house, because you're probably not going out to dinner or going to after-work happy hours anymore. But you may be able to save even more by making additional budget cuts.
Begin by cutting all of your unnecessary costs, such as the subscription services you never use. Next, focus on nice-to-have costs, such as online shopping. You don't necessarily need to eliminate these expenses entirely (as long as you can afford them), but if you're trying to save more, see if you can cut back a little. Finally, aim to lower your spending on essential costs, like groceries and utilities. You may not be able to save much in these categories, but every dollar counts.
3. Make sure you have a healthy emergency fund
Now more than ever, it's vital to have a robust emergency fund. Even if you're secure in your job and can comfortably afford to pay all your bills, you never know when things might change. By having a healthy stash of emergency savings, it will be easier to avoid tapping your retirement fund or racking up debt if you lose your job or face an unexpected expense.
Aim to have enough saved in your emergency fund to cover around three to six months' worth of general living expenses. And as you're saving, park your cash in a high-yield savings account. These accounts earn significantly higher interest rates than a normal bank savings account, so your money will grow faster. An additional benefit of this type of account is that, unlike a CD or money market account, you can withdraw your cash at any time without facing any penalties.
The U.S. economy may not be in the best shape currently, but things will improve given enough time. It's never a bad time to improve your financial situation, and by taking these three steps right now, you can take advantage of the opportunity to strengthen your finances and build long-term wealth.