Four tips to help your financial recovery from COVID-19

The pandemic has caused more than its fair share of hardworking Americans to be furloughed, laid off, work fewer hours, or take a cut in salary. If you were one of those affected, we hope the vaccination rollout and reopening of much of the economy has meant the return of job security and money in your pocket. But those lost months can complicate a financial recovery, so try following these tips so you can get your finances back in order.

How to beat the financial stress of the pandemic

After many difficult months in 2020 and 2021, even if you’re back to work and earning a paycheck, you may still be feeling some financial stress. Those months of less—or no—pay can really beat up your finances. But you can get back your financial footing, and you can start by taking stock of your situation:

If you answered yes to any of these questions, we’ve got some tips to help you get back to your pre-pandemic—or even better—financial health. 

1 Create a budget for your new normal

Even if you followed a budget before the pandemic, a “yes” answer to any questions above means that your situation has changed, and you’ll need a new budget. Budgeting sounds worse than it is—after a little prep work, you have guidelines to follow, making your financial recovery easier.

How to create a budget

Add up your monthly income

Add up your paychecks and other sources of regular income. 

Look at your monthly expenses

Look back at your bank account statements, credit card statements, and other receipts, and put your spending into categories: 

    Fixed expenses: the costs you must cover every month, such as rent, mortgage payments, other loan payments, and utilities 

    Variable expenses: costs that vary from month to month and include essential items—such as food and medical expenses—as well as nonessentials items—such as eating out, clothing, and travel

Subtract your expenses from your income

If you end up with a positive number, it should mean you can start to save some money. If not, you’ll need to either find ways to cut back on more expenses or eliminate them. 

Set your goals

Do you need to pay down your credit cards? Are you trying to save for a new car—or maybe a vacation? Decide how much to set aside for each of those items every month. 

Plan your spending

Once you know how much money you have available, and what you’re going to spend it on, write it all down—that’s your budget. And follow it monthly. If something comes up that you want to spend money on, see if there’s room in the budget. If there isn’t, then it’ll have to wait until there’s some wiggle room.

A few more considerations for your budget:

  • What habits can you change? $2.50 for the iced coffee you buy on your commute costs $625 over a year. Even changing to every other day would give you $300 for something else at the end of the year. 
  • Inflation has picked up during the pandemic—with consumer prices increasing 5.4% from June 2020 to June 2021.1 Make sure your budget considers inflation and its cousin, shrinkflation—which is when manufacturers make a product or package smaller but charge the same as they charged before.
  • Understand the difference between wants and needs. If you focus on your needs today, you’ll eventually be able to add in your wants. 

2 Pay down your debt

Your budget should include any debt payments you make. And understand that not all debt is equal—there’s good debt and bad debt.

  • Good debt is generally low interest and used to buy things that can improve your life—such as a mortgage or a car loan
  • Bad debt is generally higher interest and is due to spending on things that do little to improve your financial situation. Credit card debt can fall into this category, especially if you don’t pay it off in full every month.

One key difference between good and bad debt is the interest you pay. Credit card interest rates2 are easily six times higher than mortgage interest rates.3 

Comparing mortgage rates and credit card rates

Credit card interest rates (19.62%) are far higher than mortgage interest rates (2.98%) .

Sources:, 7/15/21; Investopedia, 7/4/21.


Whatever the kind of debt, try to minimize the amount you have, and make your payments on time

  • Pay off your high-interest rate debt first—most likely your credit cards. And stop using them. Add the payments to your budget. Once you’ve paid it off, you’ll free up space in your budget for other items.
  • If you have student loans, you’ve likely been granted forbearance during the pandemic. Make sure you know when you need to start making payments again. 
  • If you plan to pay back a CRD you took from your 401(k), make sure you understand the rules and timing.

3 Build—or rebuild—emergency savings

If you had emergency savings set aside when the pandemic hit, you’ve likely had to use some of it. Good for you—that’s what it’s there for! You had the money you needed and you didn’t have to use your credit cards, which charge you interest. 

If you didn’t, you may have had to use credit cards or borrow from family. Start setting aside even a little each month, so you have a cushion built against the next unexpected expense. An emergency savings account should be able to fund three to six months’ worth of expenses. 

Add an emergency savings line to your budget. You can make it easy by setting up automatic transfers from your paycheck or checking account every month. And the next time emergency strikes, you won’t have to worry about where the money will come from. 

4 Resume contributing to your retirement plan 

If you cut back on—or stopped—contributions to your retirement plan, resume as soon as you can, even if it’s just another 1%. The money you save adds up over time, due to the amazing math of compounding interest. That means that the money your savings earns may then earn more money, and so on. And the longer you have to give it a chance to build, the better. 

For example, let’s say you make monthly contributions of $500 and, over time, earn 5% on your money. After five years, you’d have contributed $30,000 and earned $4,003, for a balance of $34,003. But given 30 years to grow at 5%, you’d have contributed $180,000 and earned $236,160, for a balance of $416,160. To see how it could work for your contributions, try this calculator.

The power of compounding

See what happens if contributions and earnings grow at 5% per year.

  5 years 10 years 20 years 30 years
Contributions $30,000 $60,000 $120,000 $180,000 
Earnings $4,003 $17,643  $85,526  $236,160 
Total savings $34,003 $77,643 $205,526 $416,160 


This mathematical illustration is hypothetical, and there are no guarantees that results shown will be achieved or maintained over any time period. It assumes no withdrawals and does not consider fees associated with investing.

Financial recovery after the COVID-19 pandemic may not be easy, but it is possible

Life takes all sorts of twists and turns, and the pandemic brought new twists to our financial lives. Putting your personal finances back together may seem daunting, but as with anything, having a plan and steps to follow can make it easier. The basis of your financial plan is a budget that helps you prioritize where to put your money according to your goals. It can also help you decide when you can splurge on a little treat for yourself. Because after all that you’ve been through in the last year and a half, you certainly deserve a little treat now and then. 


1 “Consumer Price Index—June 2021,” U.S. Bureau of Labor Statistics, July 2021. 2 “Current Mortgage Interest Rates,”, 7/15/21. 3 “Average Credit Card Interest Rate,” Investopedia, 7/4/21.

The content of this article is for general information only and is believed to be accurate and reliable as of the posting date but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made herein.