As the world welcomed 2021’s arrival, many people pledged to adopt good practices, change behavior, or accomplish a new goal. While exercising and losing weight continue to top the list of New Year’s resolutions, many adults are focused on physical, mental and financial wellness in 2021, particularly as many continue to cope with lasting effects of the COVID-19 pandemic.
This week marks the start of the Biden-Harris administration. President-elect Biden recently outlined a $1.9 trillion economic relief plan that, if confirmed by Congress, would provide an additional $1,400 in relief payments to eligible adults and children, extend emergency unemployment benefits through September, extend a federal moratorium on evictions through September and provide $30 billion in additional aid to renters.
How should households best utilize the stimulus package passed late December as well as additional relief potentially afforded by the Biden relief plan if it is finalized? National nonprofit GreenPath Financial Wellness suggests that households first use stimulus funds to take care of essential needs (housing, medicine, food/water, electricity, etc.). Once these expenses are covered, use stimulus to establish emergency savings. GreenPath’s stimulus guide can help people understand stimulus eligibility and track payment: https://www.greenpath.com/how-to- get-your-stimulus-check/.
“January is often our busiest call volume month as people come to grips with their spending and make resolutions to become financially fit,” says GreenPath CEO, Kristen Holt. “As women and workers of color bore the brunt of lost jobs last month, we are confident that the stimulus will provide needed relief for many, many households. Many of our bank and credit union partners are continuing to offer hardship assistance when requested. Yet, we advise our clients that this assistance and relief is temporary, and that forbearance is not forgiveness. The sooner borrowers make a plan to tackle their debt and prepare to stick to that plan, the better.”
Now’s a good time to acknowledge if debt has become a challenge. Does the individual only pay the minimum monthly payment? Use credit card cash advances to pay bills? Is maxed out or over the limit on credit cards? Is receiving collection calls? If the answer to these questions is “yes”, the individual should first outline the amount of debt owed. Using a debt calculator will give people a clear picture of their financial situation.
He/she should understand their “why” – imagine what a debt-free future would look like, identify the financial goals he/she wants to achieve, and use these as incentives to reduce debt. Automate payments to pay bills on-time (set it and forget it) and pay as much above minimums as possible. Rethink non-essential spending. Identify additional sources of income (i.e., sell things no longer used) to free up cash.
Those overwhelmed with debt can take control of their finances using a free financial health assessment. Examine which payoff strategy — either the Snowball method (paying off smallest debts first) or Avalanche method (paying more on debt with highest interest) would best help the individual pay off debt. Consolidate debts into a personal loan or balance transfer credit card with zero or low interest. Contact GreenPath to discuss if a Debt Management Plan can help to pay off unsecured debt in 3-5 years. In 2020, GreenPath helped thousands of households pay off more than $250 million in debt.
Holt adds: “It can take anywhere from 18 to 254 days for a person to form a new habit. GreenPath’s certified counselors are ready to help people seamlessly adopt financial wellness practices and make debt management and saving a new habit. Many of our clients often say they wish they had sought help sooner.”
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