Ideas For Tackling Finances At Home

You’re stuck at home while the country battles the COVID-19 pandemic. Now might be the perfect time to gain control of your finances. After all, you’re stuck home. Why not take the steps necessary to boost your financial health?

Not sure where to start? Maye you’re finally ready to make good on your New Year’s resolution – even if it is a little bit late – to improve your financial health? Here are some tips on how to improve your finances while waiting out stay-at-home orders.

The first key to keeping your finances healthy during shelter-in-place orders? Sean Potter, a financial analyst and founder of the blog MyMoneyWizard.com, says it's to stay calm.

As Potter says, it's easy to panic when reading or watching the news about COVID-19. And that panic might cause you to make rash financial decisions, such as pulling the money out of your investment vehicles too early.

Potter points to late March. The value of his stock market portfolio had fallen by more than $107,000 thanks to concerns over the pandemic. Potter, though, avoided the temptation to panic and didn't sell off his investments. By now, his portfolio has recovered most of the money it had lost. If he would have sold at the end of March? Potter would have lost that money.

That's why Potter tells people not to obsess over bad news and remain focused on the long-term value of their investment portfolios.

"Selling during market downturns usually only locks in losses and leaves you missing out on the market's recovery," Potter says.

Kari Lorz, Portland, Oregon-based founder of MoneyfortheMamas.com, recommends taking advantage of the new free time you have when sheltering in place to make a positive financial move and reduce your expenses. You can do this by cutting out services and products that were initially designed to save you time. Because you now have that extra time—maybe because you no longer must commute each day to work—you no longer have to spend for these items.

This might mean no longer spending extra at the grocery store on prepared meal kits, now that you have more time to cook. It might mean no longer paying for a cleaning service. After all, you now have plenty of time to clean your apartment or home on your own. You might no longer need to pay for someone to mow your lawn or wash your laundry.

By doing these tasks on your own, you may find you can save a lot of money each month.

"Since most of us have a lot of time now, we should cut back on those expenses that were for convenience," Lorz says.

Lisa Torelli-Sauer, West Grove, Pennsylvania-based editor at Sensible Digs, a website geared toward helping people make smart investments in their homes, said that people should use the extra time stuck at home to pay off their debts, potentially saving them money in the long run.

Her suggestion? Turn to the debt avalanche method, a proven method for improving your finances.

In this debt-repayment strategy, you concentrate on paying off your debts with the highest interest rates first. Usually, that would be your credit card debt.

"This is a guaranteed way to save money, Torelli-Sauer says. "The longer debt is carried at a higher interest rate, the more interest you will pay."

Here's how this works: Make a list of all your debts, including interest rates and monthly payments for each. Make the debt with the highest interest rate your priority. Continue making the minimum payments on all of your debts each month. But apply any extra money you have during the month toward the debt with the highest interest rate.

Once that loan is paid off, start applying any extra funds to the debt with the next highest interest rate. Continue until all your debts are paid off.

You can also rely on the debt snowball method of paying off your debts. This works much the same as the debt avalanche, only you spend your extra money paying off your smallest debts first and then work your way up to your larger ones.

The negative of this method? You’ll spend more money paying down your debt because you won’t necessarily be paying off those with the highest interest rates first. The positive? You might get a psychological boost by eliminating those smaller debts. This boost might encourage you to keep with your debt-repayment plan.

Jordan Shanbrom, a life insurance agent and founder of Lancaster, California's California Life Coverage, said that shopping for better insurance rates can help reduce your expenses.

"Many times, people have expensive life insurance policies when there are much better and affordable options out there," Shanbrom says.

Maybe you purchased a life insurance policy two years ago when you were battling high cholesterol. Since changing your diet, you've lowered your cholesterol level. You might now qualify for lower life insurance rates, saving you money each year.

If you've made healthy changes to your life, Shanbrom recommends shopping for a new life insurance policy. But the same could be said of most insurance policies. Maybe you've installed a home security system in your home. This could provide you with a discount on your homeowners' insurance policy. Maybe you've reduced your commute to work—once you do return to the office, of course. This could result in a lower auto insurance premium.

If you're worried about how much money is coming into your home, you might consider taking on a side hustle.

Matt Woodley, Danville, California-based founder of CreditInformative.com, says that online micro jobs are a good option for those looking for extra cash. These are temporary, small jobs that people book through the Internet. The work might involve writing a blog post, serving as a virtual assistant, helping someone design a web site or completing surveys about the quality of online ads.

Once you complete the online job, you are paid a modest fee, often through PayPal or another transfer app.

"If you have some extra time on your hands, these jobs require very little brainpower and pay decently well," Woodley says. "The more you complete, the more rewards and bonuses you are eligible for. As we all know, everything counts in these times of uncertainty."

John Bodrozic, co-founder of Eldorado Hills, California-based digital home management service HomeZada, says that people stuck at home should work out a budget for maintaining that space.

"Not performing small tasks around the home increases energy costs and causes expensive fix or repair costs because equipment and home-building materials are not properly maintained," Bodrozic says.

It's not fun spending $150 on a plumber to fix that leaky sink. You might not want to take a trip to the hardware store—even though it is considered an essential business—to buy the materials needed to shore up a sagging back deck. But spending this money now can prevent those maintenance issues from becoming bigger, more expensive problems.

A leaking sink can add up to steady hikes in your water bill. A deck that's creaky could cost thousands of dollars to replace if it begins to crumble. So making a budget and saving money for home repairs now can save you big in the future.

How much you need to budget for home repairs depends on the size and age of your home. But Bodrozic recommends saving from 1 to 4 percent of your home's purchase price to cover the annual costs of home repairs and maintenance. That might seem like a lot of money to stow away in a savings account. But doing this will help you keep your home healthy and keep big-money repairs at bay.

"One percent is a good number if the home is less than 5 years old, but a 4 percent number is appropriate if the home is more than 20 years old as more things are at the end of their useful life and will need to be replaced," Bodrozic says.

And if you follow these strategies while you shelter in place? Expect to end the shutdown with less debt, more savings and a sound financial future.