What to Do With Extra Money

This article provides information and education for investors. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks or securities.

Despite the massive economic toll the coronavirus pandemic has wreaked on many people, others may have added some unexpected cash to their bank accounts. According to a Pew Research Center study, about 42% of Americans say they’ve been spending less money since the start of the pandemic. Decreased spending, tax refunds, relief checks and unused vacation funds may have given you a surplus of cash — and a pending decision about what to do with it.

If you’ve accrued some extra cash because of the pandemic or another reason, here are six ways to use it to help take your finances to the next level.

1. Create or build up an emergency fund

If 2020 taught us anything, it’s that the unexpected can happen, and it pays to be ready for it. The first step you may want to take with any extra money is to ensure you have a financial cushion for when those unexpected events come around. To make this money extra effective, you can put your emergency fund into a high-yield savings account. That way, your cash may benefit from a higher interest rate, but you’ll still have quick access to it.

2. Get your 401(k) match

If you’ve been holding off on investing in your 401(k), now is the time to start — especially if your employer offers a match. Say your employer offers a full 3% match on your contributions and you make $50,000 a year. If you contribute 3% of your salary, or $1,500, your employer will also kick in $1,500, upping your total annual 401(k) contributions to $3,000. If you don’t have access to a 401(k), don’t worry. There are still plenty of ways to invest for your future.

3. Pay down high-interest debt

If you’ve got extra money lying around, you might as well use it to save yourself money in the future. If you carry a balance on a credit card or loan and have a high interest rate, your best investment may be to pay off that balance. Generally speaking, if your interest rate is higher than you can expect to earn in the stock market or any other investment, you may get a better return on your money by paying off that debt.

4. Start funding an IRA

If you don’t have a 401(k) or you’ve already contributed enough to get your employer’s matching contribution, consider investing through either a traditional or Roth IRA. Individual retirement accounts aren’t investments; they’re specific types of retirement accounts that come with tax advantages, which you can use to buy investments. Contributions to traditional IRAs are often tax-deductible, and Roth IRAs allow you to take out qualified distributions tax-free in retirement, which means you don’t pay taxes on your investment earnings. Once you fund an IRA at an online broker, you can start filling it with investments. It’s often considered a good idea to primarily invest in diversified funds such as mutual funds. Funds are made up of many different stocks or bonds, so if one company doesn’t perform well, your portfolio is buffered by the other companies you’re also invested in.

Both traditional and Roth IRAs have contribution limits, so you can contribute only a certain amount each year. For 2021, that amount is up to $6,000 (or $7,000 if you’re 50 or older). IRAs also have limitations on who can contribute. For both types of IRAs, you must have taxable compensation, and for Roth IRAs, you can contribute only if your modified adjusted gross income is below certain thresholds.

If you don’t want to choose your own investments, you can open an IRA with a robo-advisor. Robo-advisors use computer algorithms to build and manage an investment portfolio for you, usually for a fee of between 0.25% and 0.50% of your assets under management.

5. Save for your other money goals

According to the Pew Research Center, about half of nonretired Americans say that the economic impacts of the coronavirus pandemic will make it harder for them to achieve their financial goals.

Retirement isn’t the only thing in your future — take some time to outline what you want your money to do for you. Do you want to save for a down payment on a house, or start a college fund for your kids? Goals that are at least five years away can typically involve investing at least a portion of your savings so that money grows. For short-term goals, it’s often wise to keep the money close at hand in a savings account where you won’t risk losing your principal.

6. Explore additional investment options

Once you have investments that set you up for the long term, you may want to start expanding your repertoire.

If you’re looking to buy individual stocks, you can research companies you’re excited about and believe will perform well in the future. If you’re interested in real estate, you could explore investing in real estate investment trusts. REITs are companies that own or finance income-producing real estate. Many REITs trade on stock exchanges, so you can buy them within your IRA or a taxable brokerage account.

To have your investment dollars go toward causes you care about, you can look into sustainable ESG investments. If you’re intrigued by the constantly evolving space of alternative investments, you could consider cryptocurrency.

While these investments may be more exciting than your other investments, they should generally make up only a small percentage of your portfolio — they often carry a higher degree of risk than more diversified investments like mutual funds.

Alana Benson writes for NerdWallet. Email: abenson@nerdwallet.com.

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6 Steps for Financial Spring Cleaning, Pandemic-Style

Given the challenges of pandemic life, many financial tasks may have stayed on the back burner this year as we all tried to just make it through each day. At the same time, the pandemic had a big impact on our financial lives, and some money-related to-do’s are likely in order.

Now that it’s spring, it’s a good time to conduct a thorough review of your finances and address any neglected areas. Here’s how to spring clean your finances after a year of pandemic living.

1. Update your budget

Your spending patterns might have totally changed over the last year: According to the Federal Reserve Bank of St. Louis, travel, hotel, restaurant and bar spending fell during the pandemic, while grocery and beverage store spending went up.

So it may be time to create a new budget that reflects current expenses, says Curtis Bailey, certified financial planner and founder of Quiet Wealth Management in Cincinnati. “Covid changed spending patterns last year, and potentially going forward,” he says. He suggests anticipating what habits you plan to continue beyond the pandemic and avoiding any drastic changes, such as buying a second home, until you’ve done a thorough analysis of your needs going forward.

Shea Newton, CFP and president of Financial Journey in Leesburg, Virginia, recommends redirecting some of that previous spending into an emergency savings account. Some people, she says, may want to replenish their emergency fund after dipping into it over the last year, or boost it to a higher level, given the income uncertainty many people continue to experience.

2. Set new financial goals

Looking forward to beyond the pandemic, you might want to set new financial goals, such as finally taking a big vacation or finding a job that allows you to continue working from home. “You may be reeling, trying to figure out your direction again. Ask yourself what is truly important” and whether your current spending reflects that, suggests Andrew Mitchell, CFP and financial advisor at Fiduciary Financial Advisors in Grand Rapids, Michigan. If you want to go on a big trip but much of your spending currently goes to daily expenses, then you may need to adjust your budget.

Mitchell also suggests asking yourself if you’re prepared for the next catastrophe. Looking back, do you wish you had had a larger savings fund going into 2020 or more diversified investments? Reflecting on those questions can help you set new goals that will help you get through the next challenge, he says, whenever it may arrive.

3. Review your insurance coverage

The pandemic has had a big impact on our homes: Not only are we spending more time inside them, often with more expensive technology and other items to help us work or attend school from home, but housing prices have also increased. According to the Federal Housing Finance Agency, home prices rose 10.8% between the fourth quarters of 2019 and 2020. You might need more insurance coverage than you currently have, says Noah Damsky, principal of Marina Wealth Advisors in Los Angeles.

The cost of building materials has also gone up, which means it would cost more to replace a damaged home, he adds. His firm recently helped one of its clients increase their dwelling coverage by 40% to better reflect how much it would cost to rebuild the home today.

Damsky also recommends increasing coverage for water damage. “Since we’re spending more time at home, we’re likely using water more frequently, and the potential for plumbing issues increases.” If you rent, then renter’s insurance is crucial. Apartments carry a higher risk for flood damage with so many people at home straining the shared infrastructure, he says.

4. Streamline subscriptions

Because of all the time spent at home, many families increased their spending on subscription services such as Disney+, Netflix and HBO. As we all start to leave the house more, it might be time to scale back, suggests Jason Dall’Acqua, CFP and president of Crest Wealth Advisors in Annapolis, Maryland. “Cancel the subscription services that you will no longer be using as much and realign your budget with more normal circumstances,” he says.

5. Update your credit card

If your spending patterns have changed, you might also want to consider a new credit card that better maximizes your current lifestyle. Bailey suggests first logging into your credit card accounts and pulling up a summary of last year’s spending, as well as the rewards that you earned.

Did you maximize your reward earning potential and redeem those rewards in valuable ways? If you spend a lot on takeout or restaurants but your current credit cards don’t reward you for that spending, then it might be time to apply for a new card that does, he says.

6. Zero out mobile app balances

Given the rising popularity of payment apps like Venmo, PayPal and Cash App, it’s a good idea to check your balances: NerdWallet found that about two-thirds of mobile payment app users say they have maintained a balance in their accounts, which means they aren’t earning interest on that money. Instead, consider transferring your cash into a high-yield savings account.

“Interest rates are low right now, but if you get into the habit now of moving money into your savings account, when interest rates rise, you will see a bigger impact,” says Newton.

Kimberly Palmer writes for NerdWallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.

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College, Interrupted: The Case for Going (Back) to School

A cautionary note for the high school classes of 2020 and 2021: Waiting to enroll in college decreases the likelihood you’ll ever attend or complete a degree.

It’s a valid concern for both cohorts. Due to the pandemic, undergraduate enrollment was down 2.5% in fall 2020 and down 4.5% for spring 2021, compared with the previous fall and spring, respectively, according to the National Student Clearinghouse Research Center.

There are also warning signs of an enrollment slump to come. The class of 2021 is lagging in completing the Free Application for Federal Student Aid, or FAFSA. The application is the gatekeeper for college financial aid and, as of April 2, 2021, completion is down 7% compared with applications completed by the same time last year. FAFSA completions are an indicator of enrollment for the upcoming academic year, says Bill DeBaun, director of data and evaluation at the National College Attainment Network.

“When you’re talking about the senior class that measures millions of students, you’re talking about many students with their postsecondary trajectory potentially altered,” DeBaun says.

Skipping out on college, delaying enrollment or not finishing a degree has consequences:

  • You’ll earn less if you don’t go.
  • If you don’t go soon, you’re less likely to go back.
  • If you start a degree but don’t finish, you’re more likely to default on any student loans you took out.

A gap year made sense for many high school graduates in 2020 and is appealing for 2021 grads, too, experts say. The pandemic resulted in an uneven college experience that may have included hybrid and virtual learning, regular COVID-19 testing and quarantines. And not every student was well-positioned — or had the broadband access — to learn virtually.

“We’ll probably be having this conversation 10 and 20 years from now, as to how this affected the next generation,” says Nicole Smith, research professor and chief economist at the Georgetown University Center on Education and the Workforce.

If you sat out from college because of the pandemic or are planning to, experts argue that you should reconsider. Here are three key reasons why.

You’ll earn more with a degree

So what if you delay or never go to college? Opportunity costs, mostly.

Getting a degree could mean earning nearly a million dollars more over your lifetime, according to data from the Georgetown University Center on Education and the Workforce.

Delaying enrollment for one year can cost a year’s worth of wages over your lifetime, which you never recoup, according to a July 2020 report from the Federal Reserve Bank of New York.

Earnings, no matter the education level, will vary by occupation, region, gender and race. But bachelor’s degree holders still earn, on average, 31% more in their lifetimes than associate degree holders and 84% more than those with only a high school diploma.

That’s not to say you can’t consider education alternatives — short-term credential and trade programs, apprenticeships and associate degrees are all viable options. Statistically, though, a four-year degree or higher is a stronger insurance for greater earnings over your lifetime.

For low-income students and students of color who statistically have less generational wealth, degrees are also the best vehicle for upward mobility, says Michelle Dimino, education senior policy advisor at Third Way, a public policy think tank. A recent Third Way study found that most bachelor’s degree programs net low-income students high enough wages to justify out-of-pocket costs.

“What we’re seeing is students who would most benefit from the socioeconomic benefits a college degree can provide are the least likely to be enrolling at this point in time,” Dimino says. “The biggest concern that we have for those students delaying enrollment is it might lead to permanently forgoing college.”

The longer the pause, the harder it is to finish a degree

According to federal data, there are millions of adult learners who don’t start college until they’re well into their 20s or older.

But you’re less likely to complete a degree if you delay: Nearly half of those who delayed enrollment left college without earning a degree, compared with 27% of those who didn’t delay, according to a 2005 report from the National Center for Education Statistics.

The further you get from high school, the less academic support and one-on-one encouragement you have to attend college, experts say. It’s also more likely you’ll get a job, start a family and have other income demands.

“There’s something about that window of 18 to 24; if you start out at that point, you’re likely to get to where you need to be,” Smith says.

You’re more likely to default on student loans if you don’t finish

Returning to college is especially important if you have student debt, as most students do. Without a degree, federal data shows, you’re statistically more likely to be late on payments and default. This outcome can lead to a damaged credit score, collection costs and wage garnishment.

Federal data shows that among a cohort of students who started college in 2003-2004 and defaulted on student debt, nearly half didn’t complete their education, while 10% finished a bachelor’s degree.

The situation is the worst for Black student borrowers: The Brookings Institution found that Black first-time college students default at a rate three times higher than their white counterparts.

How to pay for college if your family’s finances have changed

If you’re reconsidering your decision to delay or forgo college, first figure out the best way to pay.

Start by submitting the FAFSA as soon as possible to qualify for federal, state and school financial aid, including Pell Grants, scholarships, work-study and federal student loans.

If your family’s financial situation has changed due to the pandemic, request a professional judgment from your prospective or current school’s financial aid office. You’ll need to request a specific amount and submit documentation of why you need more aid, like confirmation of a parent’s unemployment or medical bills.

If there’s still a gap to fill, consider private loans.

Alternately, you could think about entering community college for a year or two, then transferring. Find out if the community college you’re considering has credit transfer agreements (known as an articulation agreement) with any four-year colleges you’re interested in attending.

Anna Helhoski writes for NerdWallet. Email: anna@nerdwallet.com. Twitter: @AnnaHelhoski.

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How to Fill In Your Financial Blind Spots

Knowing enough about money to cover your bills is a start, but it’s not enough financial literacy to provide long-term security. Most of us eventually wonder what else we should be doing — and whether what we don’t know could hurt us.

“When you have a blind spot, you don’t realize until something blindsides you,” says Mark DiGiovanni, a certified financial planner in Grayson, Georgia.

Identifying the gaps

Self-assessments, like this quiz adapted from the Financial Health Network, as well as personal finance books and websites can help shine a light on what you don’t know.

Accredited financial counselor Bret Anderson of Morrison, Colorado, has spent much of his career helping incarcerated veterans get back on their feet and has also advised high-wealth clients. He says five things frequently predict who will manage money successfully.

Two habits — saving and investing — are crucial, he says. Good money managers also:

  • Know how credit works.
  • Have a plan to build wealth and pay off debt.
  • Know what passive income is and how to create it.

If anything on that list is unfamiliar to you, that suggests a starting point for research. “There are plenty of resources just a Google search away,” says Heather Winston, assistant director of advice and financial planning at Principal Financial Group.

Nail the basics, then keep learning

Before you add complexities, be sure you are:

  • Saving. It’s an essential habit.
  • Budgeting. If you don’t have a formal budget, check online for help creating one.
  • Planning for emergencies. You can’t prevent unexpected expenses. But an emergency fund, excellent credit, insurance — or all of those — can keep them from devastating your finances.

Next, protect your money and access to credit. Here’s how:

Check your credit scores and reports, Anderson suggests. Lenders and potential landlords or employers may see those, so it’s smart to know what’s there. In addition, a big swing in your score or an account on your credit reports you don’t recognize could suggest identity theft.

You can check your credit reports for free by using AnnualCreditReport.com. Many personal finance sites and credit card issuers provide access to free credit scores.

Keep your identifying information safe and practice good cyber hygiene. That means avoiding public Wi-Fi, being careful about what you post on social media, not opening email attachments or links you weren’t expecting, and using strong passwords. Consider freezing your credit — and that of your child — to reduce the likelihood that you’ll be victims of identity theft. Setting alerts on your credit card accounts can also let you know when they’re used.

Learn to recognize scams. Scammers try to create a sense of urgency so that you pay first and think later. They know how to make phone, email or text communications seem real. Pause before acting, independently confirm the contact information and initiate communication yourself. And remember that no one legit asks for payment by gift card or prepaid debit card.

Set goals for yourself and remember that those are individual. “One of the most critical lessons to learn is to stay focused on your needs, not on what someone who doesn’t know you, your goals or your life is saying,” Winston says. Consider working with a fee-only, fiduciary financial planner or a financial coach for help with identifying your own goals and path.

Avoid overconfidence. If you’ve had some success investing in a bull market, for example, you might not be an investing genius. Feedback from a professional may help you decide whether you were smart or just lucky, DiGiovanni says.

Help your children become financially literate. And put guidance in language they understand, Anderson says. He recalls his mother putting money aside in a “rainy-day fund,” which made no sense to him because where they lived, it seldom rained. Help children see how money is relevant, he suggests. Let them see how you make financial decisions, then let them make a few of their own.

Learn as needed

You don’t need to become a walking financial encyclopedia. There are things you may never need to know or that you can learn when they become relevant. Examples include:

  • Financial consequences of big life changes, such as marriage, divorce, parenthood or retirement.
  • Refinancing a mortgage.
  • Rent vs. buy decisions.
  • Saving for college.
  • Mandatory retirement withdrawals.
  • Income tax implications of side jobs.

Don’t wait

While no one wants to make a mistake, the costliest one may be waiting until you have “extra money” or feel more confident about financial decisions. The sooner you start saving and investing, the more compound interest can grow your wealth.

“People don’t understand the time value of money,” DiGiovanni says. “Every day you postpone is another day you will have to work.”

Bev O’Shea writes for NerdWallet. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.

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Better Savers Spend Less Money on These 3 Things

Reducing spending in three common budget categories may significantly boost your ability to save money. And a small mental trick could help you stick to an ongoing savings plan.

Those are the findings of two studies investigating the spending habits of better savers and the psychology of saving.

Here’s how to apply these habits to your own budget.

Moving from a ‘low’ saver to a ‘middle’ saver

Research conducted by the Employee Benefit Research Institute and J.P. Morgan Asset Management, published in June 2020, aimed to determine why some American adults save more than others, even when they have equivalent salaries.

For long-term employees, across age groups, the study showed that high savers save around 3% more than middle savers. And middle savers save about 3% more than low savers. Here’s how the researchers defined low, middle and high savers:

  • Low savers save about 2%-3% of their salary.
  • Middle savers save about 5%-6% of their salary.
  • High savers save about 9% of their salary, and more as they get older.

The difference is not a matter of income

It’s often believed that low savers save less because they simply don’t earn enough. However, in this study, middle savers and low savers have “very similar, if not the same salaries,” says Katherine Roy, chief retirement strategist for J.P. Morgan Funds and one of six authors of the study.

“So they’re earning the same, but it seems like the middle savers somehow are able to save 3% more than the low savers,” Roy adds.

And that 3% boost in savings “is huge,” she says. It could explain why the retirement plan balances of employees who are middle savers are almost twice as large as those of employees who are low savers.

Better savers spend less money in 3 categories

Where did low savers spend more of their money than middle savers? Three categories of expenditures, as a percentage of salary, rose to the top:

  • Housing, including a mortgage or rent, taxes, utilities, and home services and furnishings.
  • Food and beverage, including eating out and groceries.
  • Transportation, including the purchase of vehicles, gasoline, train tickets and so forth.
  • A high cost of living, such as having a home in New York or San Francisco, did not seem to be a factor in why low savers were spending more in these categories than middle savers, Roy says.

Travel was the only category where middle savers spent slightly more than low savers.

In every other category, the two groups spent very similarly. “That would include entertainment, apparel, education, charitable contributions, gifts — those types of things,” she adds.

How to gain a savings advantage

Considering your spending over a lifetime in just these three categories can impact your ability to save, Roy says.

In housing expenses, look for so-called subscription creep, where you’ve added several recurring autopay services that are drafted from your checking account each month. Streaming services are a frequent culprit here and can add up.

It’s likely you saved quite a bit in 2020 on expenses related to dining out and travel due to COVID-19 restrictions. Roy says spending in these areas that was typical pre-pandemic but has been on hiatus could offer continuing savings long after.

Use a mental trick to form a new savings habit

Once you’ve adjusted your spending and can dedicate more to savings, you might want to use a mental trick to form a new savings habit.

Hal Hershfield, associate professor at the UCLA Anderson School of Management, was one of three researchers in a study published in the journal Marketing Science in November 2020. The findings may help you set up a recurring savings plan, where money is automatically moved to a savings or investment account on a regular basis.

“We asked some people if they wanted to save $150 a month,” Hershfield says. “We asked another group of people if they wanted to save $35 a week. And we asked a third group if they wanted to save $5 a day.”

The result: Four times more people were likely to save money when the dollar amounts were presented as daily goals, rather than monthly.

“People think about the types of sacrifices they can afford to give up,” Hershfield says, and “five bucks a day feels a little easier.”

When a savings plan was framed as $150 a month, higher-income people were three times more likely than lower-income savers to participate. But when presented as $5 a day, there was no difference in participation between the two income groups.

The simple psychological shift seemed to close the savings gap between high-income and low-income savers.

This article was written by NerdWallet and was originally published by The Associated Press.

Hal M. Bundrick, CFP writes for NerdWallet. Email: hal@nerdwallet.com. Twitter: @halmbundrick.

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Reboot Your Budget to Prepare for Reopening

Picture cruising your car deep into 2021 and never glancing in the rearview mirror. Vaccines, travel and a hope of normalcy are finally on the horizon.

With so much to look forward to in the future, it’s understandable to not want to look back.

But returning to typical day-to-day life will be a transition. And from a financial standpoint, you’ll want to assess your past budgeting behavior to prepare for more normal days ahead.

Review past and current spending

Last year’s spending didn’t look like 2019. And 2021 won’t look like either 2020 or 2019. But you’ll need this historical insight to inform your future spending, especially as you start reintroducing expenses that used to be ordinary, like concert tickets, plane tickets and so forth.

Some people’s spending decreased dramatically last year (either from necessity or choice). But others faced comparable expenses, says Molly Laughter, certified financial planner and founder of Laughter Financial LLC in Dallas.

Remember that jungle gym for the kids to play on in the backyard? Or the Xbox for long nights of playing video games? They may have been great ways to keep you occupied and comfortable at home, but now you’ll need to find a way to balance these newer expenses with your past spending on the activities you hope to return to.

Since many of us are already taking a close look at our finances right now as we file taxes, Laughter suggests using this opportunity to review year-end financial summaries from your credit cards and bank accounts.

Size up each category. How much did you spend? Was it worth that amount? Would you want to continue spending that much?

Play favorites

Ever since COVID-19 became part of our vocabulary, there’s been talk that life would never return to normal. Laughter anticipates your future spending will be a “new normal.” Sure, you may introduce dinners out — and possibly even a trip — to the mix, but expect to continue paying for quarantine life staples like deliveries and at-home activities.

According to Vid Ponnapalli, CFP and owner of Unique Financial Advisors based in Holmdel, New Jersey, “There is going to be a paradigm shift with respect to how budgeting in the future will be compared to how it was pre-COVID.”

This new balance means you’ll need to play favorites with your finances. After all, you can’t keep up the amount you’ve been dropping on at-home entertainment and food deliveries while also upping the amount you spend on indoor dining and live shows. It just won’t all fit in the budget. Select the expenses you benefit from most.

To make the necessary adjustments, Laughter suggests looking at the big picture. Don’t get too caught up in specific line items. (For example, if you’re spending 25% less on grocery orders, you don’t have to redirect that exact amount to dinners out.)

Instead, once your needs and savings are accounted for, set a dollar figure you can afford each month for discretionary expenses, then spend it on whatever you want. You may never add back in some things you used to spend money on.

As Ponnapalli says, we’ve all figured out new ways to spend less money and still have fun. Dropping thousands of dollars on concert tickets may not feel worth it anymore when you compare it with watching a (much cheaper) livestream at home.

Plan for future goals

Life hasn’t returned to normal by any means. But for many Americans, the prospect of getting a vaccine is mere weeks or months away. Use the time between now and then to prepare for what’s to come.

Laughter says to think of it like advance notice. “The vaccines aren’t getting out as quickly as we’d like,” she says. “So start your clock.” Begin setting aside a certain amount monthly to accomplish a goal when it’s all said and done.

For example, if you want to travel again by a certain date, use the next few months to funnel funds into a designated savings account. If your student loan payment is on hold, make a plan for how you’ll strategically spend those extra funds in the meantime. And prepare for that added bill when it’s reintroduced.

Whatever financial decisions you make, remember, whether we’re in a pandemic or not, the fundamentals of finances don’t go away. Spread your money between things you need, things you want and savings.

Your allocations may change, but “the name of the game is the same as it was before — budgeting, budgeting, budgeting,” Ponnapalli says.

Here’s to better days and better budgets ahead.

This article was written by NerdWallet and was originally published by The Associated Press.

Courtney Jespersen writes for NerdWallet. Email: courtney@nerdwallet.com. Twitter: @CourtneyNerd.

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5 Pandemic-Driven Financial Habits Worth Keeping

As the pandemic shut down the world around her, Ashli Smith, an Atlanta resident and mom to a newborn, says she set up autopay for her recurring bills to help her stay organized and avoid late payments. “With everything going on, plus being a mom, I don’t want to forget to pay something or someone,” she says.

While the pandemic caused incredible financial stress and uncertainty, it also led many consumers like Smith to form new financial habits worth keeping, including saving more and spending less. A NerdWallet survey found that most people who formed new financial habits plan to continue them into 2021.

Here are five habits to consider sticking with even as life starts to return to normal:

1. Spend less, save more

For many Americans, spending less amid the COVID-19 pandemic came naturally because of income loss or fewer spending options after restaurants and travel largely shut down. NerdWallet’s survey found that among those who said they picked up new financial habits during the pandemic that they plan to carry into 2021, 58% said they were cutting back spending on “wants” and 36% said they were cutting back spending on “needs.”

“If your job was eliminated or your pay was reduced, then you’ve probably decreased spending and gotten used to a lower monthly budget,” says Eric Simonson, certified financial planner and owner of Minneapolis firm Abundo Wealth. “As soon as that income returns, it would be an amazing opportunity to keep expenses the same but save all of that new income.”

Natalie Slagle, founding partner at Fyooz Financial Planning and a CFP based in Rochester, Minnesota says, “For those who were furloughed or laid off, the No. 1 priority is replenishing savings.” For those who got used to spending less, she says, “we encourage them to sustain that habit so their cash flow can go toward building up their emergency fund at a higher rate than what was possible before the pandemic.” That way, it’s easier to handle the next crisis, whether it’s income loss or an unexpected expense, without taking on more debt.

2. Stick with a budget

In the NerdWallet survey, 39% of those who adopted new habits that they plan to carry into 2021 said that one of those habits was sticking to a budget.

“So many people have looked at their budgeting and spending during [the pandemic], often for the first time,” Simonson says. “It’s important to stick with this post-pandemic, since keeping a budget is part of a healthy financial plan.”

Many people turned to budgeting to help regain a sense of control that the pandemic took from them, he adds. “The financial habits you’ve been forced to learn and adopt have the power to create huge, positive, lasting change if you stick with them,” Simonson adds. Continuing to budget makes it easier to generate long-term savings and avoid debt, for example.

3. Minimize travel expenses

Among survey respondents, 40% said one of the new habits they plan to continue in 2021 was cutting back on travel spending.

“One reason we saw our clients enjoy lower expenses [during the pandemic] is because they didn’t go on their planned vacations,” Slagle says. “Not only did that cut expenses, but they also have flight vouchers and unused travel miles to spend.”

As travel begins to start again, Slagle says she’s helping clients plan on using some of those savings and credits on their next trip to avoid overspending.

4. Earn extra income

Based on the study, among those who developed new financial habits, just over a quarter said they picked up a side hustle or extra work to make money. Kevin Mahoney — a CFP and founder of Illumint, a financial planning firm for millennials based in Washington, D.C. — says earning a side income can help provide financial stability during uncertain times, which is why he encourages his clients to consider it.

“Supplemental income mimics an emergency savings fund. People who can consistently generate self-income are better prepared to withstand financial volatility,” he says.

5. Use autopay for bills

As for Smith, who tweets about personal finance from the handle @badgirlfinances, she says she plans to continue using autopay for bills, even when the pandemic is long over. In some cases, autopay comes with a small discount, too.

“It helps me stay organized because I know on a certain date, money has to come out to pay the bills,” she says.

This article was written by NerdWallet and was originally published by The Associated Press. 

Kimberly Palmer writes for NerdWallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.

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If You Need to Find Tax Help, Try DIY First

Getting help from the IRS this tax season is going to be a challenge.

The IRS has finally opened the 23.4 million pieces of mail that piled up after the pandemic shuttered its processing centers last spring. But the agency still has a backlog of paperwork from last year even as it ingests this year’s returns, issues a third round of relief payments and gears up to send monthly child tax credit payments to millions of families.

The tax deadline has been moved from April 15 to May 17, giving people more time to file. Getting help is another matter. Callers face long wait times with no guarantee they’ll reach a human being. Meanwhile, many tax help sites are closed or working at reduced capacity because of COVID-19 restrictions.

Here are some common questions and answers that could save you some time or point you to resources that will help.

Where’s my stimulus payment?

The IRS dispatched two rounds of economic impact payments last year. If you didn’t receive your payments or received less than you should have, you can claim the “recovery rebate credit” on your 2020 tax return that’s due May 17.

The third relief payment, created by the $1.9 trillion stimulus package that President Joe Biden signed into law March 11, started arriving in bank accounts shortly afterward. The rules are somewhat different for this relief check, which is worth up to $1,400 per person. For the first time, all dependents of eligible taxpayers can get the payment, including college students. Also, there is a steeper phaseout: Single filers with adjusted gross incomes up to $75,000 can receive the full amount, but the payment decreases above that level and zeroes out at $80,000. The phaseout range is $112,500 to $120,000 for heads of household, and $150,000 to $160,000 for married couples filing jointly. Payments will be based on adjusted gross income on 2020 returns, if those have been filed, and on 2019 returns otherwise.

None of the payments are taxable, and you typically won’t have to repay the money if you get too much. Taxpayers can check the IRS’ Get My Payment tool to track the status of their relief payments.

In addition to the relief payments, monthly payments of up to $300 per child are expected to begin in July and continue through December. This enhanced child tax credit begins to phase out at adjusted gross incomes of $75,000 for singles, $112,500 for heads of household and $150,000 for joint returns.

How do I get a refund of the taxes I paid on unemployment benefits?

The latest stimulus package also exempts $10,200 of last year’s unemployment benefits from taxation for people with adjusted gross incomes under $150,000. The IRS has promised to automatically refund the appropriate amounts to those who already filed their 2020 returns before the stimulus deal was signed.

Where can I get free tax help?

Most taxpayers can file their federal taxes online for free, using software that guides them through their returns and checks for errors. The IRS’ Free File program is available for taxpayers with adjusted gross incomes of up to $72,000. Unfortunately, some online tax preparers promise free filing but then divert users into paid options, so it’s best to begin the process on the IRS’ Free File page at www.irs.gov/freefile.

If you need more help, you may be able to get free assistance through the IRS’ Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs, although many of the programs are operating differently this year. Some sites are temporarily closed and others are not operating at full capacity, but the programs also have added low- and no-contact options.

For example, the largest such program, AARP Foundation’s Tax-Aide, has added online and drop-off services, says Lynnette Lee-Villanueva, program vice president. In-person sessions are still available but only by appointment.

I got a notice! What do I do now?

Consumer advocates have criticized the IRS for continuing with collection and enforcement actions while the agency was still dealing with its backlog. (As of Jan. 29, the IRS still hadn’t processed 6.7 million tax returns from 2019.) In some cases, taxpayers received past-due notices for payments already made. Sometimes the notice itself was so delayed that the taxpayer didn’t have enough time to respond before penalties were levied.

The IRS has information on its coronavirus tax relief hub about how its “mission-critical functions” have been affected. The website offers details on what you can expect and what you can do next if you received a bill or notice. If you’ve taken steps to resolve the issue that prompted the notice, for example, the IRS recommends doing nothing further — simply wait for the agency to catch up.

If your issue is pressing, though, you can try the number listed on the notice and consider contacting the Taxpayer Advocate Service office in your state. You also could hire a CPA or enrolled agent, who can give you advice and represent you with the IRS.

This article was written by NerdWallet and was originally published by The Associated Press.

Liz Weston writes for NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

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Make a Plan to Get Your Money Resolution Back on Track

We’re three months into 2021. Let’s check on those financial New Year’s resolutions. (Remember those?) Quite possibly, they’ve already gone awry.

Maybe you planned to build a $1,000 emergency fund, but the balance is still zero. Or perhaps you swore off takeout, yet you’re scraping the last bite of chow mein from a paper container as you read this.

Don’t beat yourself up. You don’t have to give up on your goal because of a setback.

“There’s nothing magical about New Year’s, and you don’t have to wait until 2022 to try again,” says Amy Hubble, a certified financial planner and founder of Radix Financial LLC in Oklahoma City.

Here’s how to salvage your money resolution.

Figure out what went wrong

Step back and examine why you couldn’t stick to your resolution in the first place. Possible culprits: the goal was vague, too ambitious or lacked a plan. For example, say your resolution was to save money. That didn’t address how much to save, how to save it and so on. A more effective resolution might have been to put $100 from each paycheck into a savings account.

Hubble recommends using the “SMART” goals framework to set resolutions. That stands for specific, measurable, achievable, relevant and timely, she says. Was your goal missing any of these elements? If so, there’s a good chance you can salvage it by restarting with this approach.

But sometimes resolutions are beyond rescuing. If your financial situation has changed since you set it — say you lost your job or unexpectedly faced a major home repair — it’s perfectly acceptable to tweak it or walk away.

“Financial planning is a process, not an event,” says Trent Porter, a certified financial planner, life coach and founder of Priority Financial Partners in Durango, Colorado. “Life’s going to change, and your goals and how you get there are going to need to adapt.”

Know your reason

Ready to give your resolution another go? Ask yourself why you’ve chosen this goal and what exactly you hope to accomplish.

“Maybe it’s less stress on your marriage or partnership, maybe it’s the ability to go on vacation once the world opens up again, and maybe it’s the ability to retire one year earlier,” Hubble says.

Having a personal reason in mind can inspire you to see it through.

Take smaller steps

If you know your “why” but struggle with how to work toward the resolution, try making “little plans within the big plan,” Hubble says. Think about what you can do on a daily, weekly or monthly basis to make reaching your 2021 goal more manageable.

For instance, if your financial resolution is to pay off $10,000 in credit card debt, calculate how much you need to pay each month to meet that goal, Hubble says. Then, focus on that smaller chunk.

Seek an accountability partner

Find someone to discuss your resolution with. A spouse, roommate, friend or co-worker can shepherd and encourage you. Consulting a partner you share finances with is especially important.

“If their goals aren’t in alignment or they’re not supportive of what you’re trying to achieve, it’s going to make it a lot more difficult,” Porter says.

Turning to an expert, like a financial planner, is also an option. If you have a complicated financial situation or resolution, they can help you craft a customized plan.

Automate your resolution

Automating the work allows you to make strides even if you lose momentum or are prone to forgetfulness. You can set up recurring bill payments, transfer money between bank accounts or track spending with an app, for example.

If you need to pay $200 toward a credit card bill every month, have that payment automatically taken out on payday before you have a chance to overspend, Hubble says. “Make it where it’s almost harder to not pay that bill.”

Check your status

Don’t get too comfortable. Schedule quick check-ins with yourself or your supporter to monitor your progress. Once a month should suffice for most resolutions.

At each check-in, add up how much you’ve saved or spent so far and compare that with where you expected to be at this point. Note any roadblocks. Then you can decide whether to carry on or refine your technique.

Success won’t happen overnight. You’ve got roughly nine months left this year to hit your resolution goal. Leave the rough start behind and put your new plan in motion.

This article was written by NerdWallet and was originally published by The Associated Press.

Lauren Schwahn writes for NerdWallet. Email: lschwahn@nerdwallet.com. Twitter: @lauren_schwahn.

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