Long before the pandemic arrived on America’s shores in the early months of this year, Americans had struggled with debt, individuals struggling with too much credit card debt and the government grappling with a federal deficit. Yet the extent of these problems was easy to dismiss as temporary aberrations expected of any developed country.
The impact of the outbreak exposed all these glib rationalizations about debt in our culture. During the pandemic, American families, overwhelmed by political wrangling, the ruthless progress of a novel pathogen, and sudden economic turmoil, struggled to pay their bills. Additionally, as a result of this chaos, the federal deficit hit $3.1 trillion, which was triple the deficit of last year.
As the year progressed, the economy plunged further and the virus raged even more ferociously. As household incomes around the nation dropped because of failing businesses and job losses, it left behind a wake of exhausted bank accounts.
If your family, like millions of others throughout the country, has financially struggled because of the economic mayhem caused by the coronavirus, one way to weather the storm is to take charge of your own finances, something you can do by reducing the weight of your debt burden and increasing your earning power.
Reduce Your Debt Burden
If you have had to rely on your credit cards to pay for basic living expenses during the lean months of the year, then you may now find yourself struggling to figure out a way to pay for all the money you borrowed.
Unfortunately, getting out from under the burden of debt is not as simple as repaying the money you borrowed. You now have to pay far more than what you borrowed because of the high-interest rates on the money. What’s more, only a small proportion of what you’re paying goes to cover the principal amount itself, which means it will take you a long time to put your debt behind you.
According to Taft Financial, a financial firm, there is a simpler way of handling your debt: Get a loan that pays off all your debts and then focus on repaying this loan. After making an agreement with the lender on how much you can afford to pay each month, all you have to do is make your scheduled payments. Instead of experiencing negative cash flow at the end of every month, you’ll have positive cash flow because you’ll only be paying what you can afford based on the calculation of your monthly income and expenses.
Increase Your Earning Power
The money you earn from your knowledge, skills, and experience is what the market will pay. If you work in a lucrative field, then you will earn more than somebody working in a less financially rewarding field. For instance, if you are a database administer, you will earn a salary of about $90,000 a year, and if you are a retail salesperson working in a department store, you will earn an income of around $24,000 a year. The huge discrepancy between the two lines of work is because the marketplace considers administering a company’s information a more valuable economic contribution than helping people shopping in a store.
This intimate relationship between industry and pay rates creates two possibilities for increasing your income:
- Ask your employer to pay you what you’re worth to the marketplace. If you feel you are being underpaid based on your qualifications because your current employer is paying you below-market-rates, then you should either ask for a raise or find another employer who will pay you what you are worth.
- Learn more to earn more in a better paying field. If you are earning a fair wage but working in an industry that does not pay much, then you can improve your income-earning ability by moving to a higher paying industry. By learning new skills, perhaps even getting certified in them, you’ll be able to gain employment in a company that will pay you handsomely for them.
In summary, 2020 may have been a tough year for you, but you can still turn things around for the better by reducing your debt burden and increasing your earning power.