KNOXVILLE, Tenn. (WATE) — Since the coronavirus pandemic began, national surveys show that lots of people are being more conservative with their money.
As we continue to face unprecedented economic times, having a plan for your household finances and prioritizing your spending will be key to your financial stability.
WATE 6 On Your Side’s Don Dare spoke with a financial expert about the financial side effects of COVID-19.
In order to shore up the economy, the federal reserve bank cut interest rates to record lows earlier this year — which means mortgage interest rates are lower and financing a car or truck has gotten less expensive.
For those who have a job, now is the time to closely examine your budget — and perhaps pay off some of those debts.
Financial professional John Vandergriff from Blue Ridge Wealth Planners says the pandemic has created the opportunity for families to use money that they’re not spending in the right way.
When COVID-19 locked down restaurants and retail stores in the early spring, millions of people slowed their spending. With the partial reopening of businesses in the summer, people started going out again, but by and large many are still being conservative with the money.
John answers this question — with interest rates slashed — how can I take advantage of low-interest rates?
“A lot of the debt that you have whether it is mortgage debt or credit card debt could possibly be refinanced or renegotiated to a lower interest rate,” John Vandergriff said. “Going through that avenue first and you may even have to consolidate some of the credit cards as you do that to get that lower interest rate.
“There are some companies that may offer you a loan to consolidate your credit cards. You could pay a much lower interest rate on that loan than what you are paying on those credit cards at the time which may be a life saver for you especially if you are in double-digit or low 20 percent interest rate.”
Many have turned to buying online and that means we are using our credit cards — frequently.
John answsers the question — How do you best tackle credit card debt?
“Sometimes it is easier to pay off the things that can be paid off first. If you can’t package them together, you may want to take and remove the obligation off a certain amount of money per month and it gives you the flexibility to either take that money and divert it into your savings to keep you from going further into debt,” John Vandergriff said. “Or, taking it and adding to the payments that you are already making for your credit cards so you can pay down those credit cards faster.
“The lowest balance is one. I know Dave Ramsey a lot of times mentions it makes you feel good to pay off those debts. But if your lowest balance one is your least interest rate and you have a higher balance one that may not be too much higher than that, but it has a way higher interest rate, I would pick the higher interest rate first.”
John says having a plan, and prioritizing spending is critical in this time of uncertainty.
“The key is not to ignore the problem. You want to address it and come up with a strategy how you go about solving the problem.”
That strategy may include either creating or adding to your emergency savings plan; those emergency funds are for times of no income, which include unemployment or missing work due to an emergency medical crisis.
Until either of those situations arise, John Vandergriff will tell you, it’s always a good idea to sit tight and leave your emergency savings alone.
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