These healthy financial habits can make the difference between struggling and surviving in any money emergency.

CHICAGO, May 20, 2020 – As the COVID-19 pandemic unleashes its devastating impact on the nation’s economy, now is the time to take stock of your current financial situation and establish healthy habits that will put you on a stronger financial footing once the pandemic ends and the economy recovers—or for when the next emergency hits. The Illinois CPA Society offer these tips to help you better manage your personal finances now and in the future.

1. Set a Budget

Start by taking stock of your pre- and post-COVID spending to identify areas of savings and expenses that will return, and then use that information to build a realistic budget that you can stick to. Don’t eliminate all “wants” from your spending but consider ways to cut back spending where you can. For example, if you like stopping for a cup of coffee each morning, budget for it and limit the budget by purchasing gift cards each month. Once the card runs out, you stop buying coffee. This allows you to indulge your “wants” within a budget.

Don’t let budgeting fall to the wayside after the economy improves, either. Following the 2008-09 recession, many Americans focused more on budgeting and spending, but as time passed, those habits faded. A 2018 AICPA survey found that only 39 percent of respondents were following a budget, down from 58 percent in 2015—showing that many of the good habits learned from tough economic times fade over time. It’s best to revisit your budget quarterly or annually and adjust as needed.

The AICPA’s 360 Degrees of Financial Literacy website offers a free calculator to help you create and maintain a budget.

2. Build an Emergency Fund

The sudden onset of the pandemic, unexpected job losses, and investment declines have highlighted the importance of having liquid savings to cover necessary expenses in case of emergencies. Tapping retirement savings for living expenses in an emergency is not a wise financial move. Instead, focus on building a cash emergency fund that can sustain your monthly budget of necessities for anywhere between three to 12 months. Once the fund is established—preferably in an interest-earning savings account—redirect the cash you were using to build the emergency fund to pay off debt or save for retirement.

3. Cut Debt

With interest rates trending lower, now is a great time to put your extra cash from reduced spending toward refinancing and paying down high interest credit card debt, mortgages, and other loans. And if interest or payments on any loans have been deferred temporarily—like federal student loans, keep paying them and use this as an opportunity to get ahead. Making payments now reduces the total amount you will pay in interest and the time it will take to pay it off.

4. Remain Committed

If you have trouble sticking to a plan going forward, find an accountability buddy, such as your CPA, spouse, family member, or friend, to keep you in check. The coronavirus pandemic is the third major financial calamity to hit the country in the past 20 years, starting with the dot-com bubble bursting in 2001, followed by the housing-fueled Great Recession of 2008. It is likely you will see another major economic downturn in the future. Implementing and maintaining good financial habits will better position you to weather those stormy times.

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The Illinois CPA Society offers a free “Find a CPA” online directory that allows individuals, businesses, and not-for-profit organizations to search for a CPA by location, types of services needed, industries served, and language preference.

About the Illinois CPA Society
Founded in 1903, the Illinois CPA Society (ICPAS), with more than 23,300 members, is one of the largest state CPA societies in the nation. Its mission is dedicated to enhancing the value of the CPA profession through the strategic initiatives of advocacy, information, education, and connections. 

ICPAS supports 360 Degrees of Financial Literacy, a national effort of the AICPA and state CPA societies to improve the financial understanding of Americans. For more information about the profession’s efforts, visit www.360financialliteracy.org.