2020 was, well, tumultuous to say the least.
The COVID-19 pandemic and recession caused devastating long-term unemployment and income losses for many, historic low interest rates for borrowers, and stock market highs for investors.
Since NextAdvisor’s launch in June, we’ve followed along, looking to the experts and Americans directly affected to better understand — and share — how it all impacts your wallet. As we say goodbye to 2020, our writers and editors are reflecting on what we learned, and want to share some new practices we’re bringing into the new year.
We All Need Safety Nets
The coronavirus pandemic hit the United States in early March, resulting in millions of jobs lost, shuttered businesses, and deep uncertainty about the future. At its peak in April, the unemployment rate reached 14.7%. Today, more than 12 million people remain unemployed.
And while the CARES Act initially kept unemployed workers afloat through expanded federal unemployment benefits and relief programs, people unable to return to work are facing real financial cliffs when more programs end later this month.
Throughout the year, we spoke with Americans laid off from some of the hardest-hit industries, as well as small business owners struggling to stay afloat. We learned about the confusion people felt navigating a complicated, fluctuating system which kept many from receiving the benefits they were owed and others without a plan when that financial lifeline was cut short. Most recently, we shared the experiences of a few people who have made long-term life changes in response to the hardship they faced this year.
As the challenges continue into 2021, we recognize the importance of continuing to share stories like these, and providing resources for those still struggling. Here’s some of our best coverage of resources and information to help navigate these financial challenges:
- Guide to relief programs ending soon, and how to prepare
- Unemployment benefits ending Dec. 26
- Resources for rent relief
- Mortgage forbearance options
- Utility relief programs
- Options for childcare
- Health coverage under Medicaid or state marketplace plans
- Federal, state, and local assistance programs, including SNAP and TANF
- How to survive a financial crisis without an emergency fund
Sometimes It’s Good to Break the Rules
This year prompted many of us to rethink our financial priorities and question long-standing personal finance “rules.”
“Before the pandemic, I prioritized paying down my student loans, but over the past few months, I’ve focused on saving that money instead,” says writer Alex Gailey, following the advice of money expert and NextAdvisor contributing editor Farnoosh Torabi in our story about post-election money moves. “It seems contrary to what you usually hear, but I decided to take advantage of the temporary payment pause on federal student loans to build my savings.”
For most people, saving should be top priority right now, Torabi says, while using deferment plans and avoiding paying federal student loans too aggressively in case new relief comes in the new year. But she also acknowledges the smartest money move is one that works for you regardless of potential reforms. “We still need to hold ourselves accountable for our finances,” she says.
For Gailey, rethinking debt payoff vs. saving has helped her feel more financially secure. “It gives me peace of mind knowing that I have some money stashed away, in case I’m faced with an emergency expense during these unpredictable times,” she says. “Plus, it’s given me extra time to craft a strategy for how I’m going to tackle my student loan debt moving forward.”
It’s Always a Good Time to Save
If there was one overarching financial takeaway from 2020, it’s the importance of having some kind of emergency savings safety net to cover an unexpected expense or survive long-term financial hardship. But choosing where to save can feel like just as much of a feat as actually saving — whether you have $1,000 to put away or a fully-stocked 6-month emergency fund.
A high-yield savings account is among the safest and most convenient places to store your savings, while offering the added benefit of increasing your balance over time via interest. Even in today’s low-rate environment, most high-yield savings accounts offer at least 5x the national average compared to traditional savings.
High-Yield Savings Accounts Can Pay
“I did not really consider a high-yield savings account before starting work at NextAdvisor in the summer,” says senior editor Alberto Riva. “But after reading a story about missing out if you did not have one, I realized I was missing out indeed — and promptly corrected that mistake.”
And despite low rates reducing your high-yield savings account’s interest potential, experts like Greg McBride, CFA, chief financial analyst for Bankrate.com, still recommend it as the best place to secure your savings over the long-term. “You can get to it easily by linking it to your checking account at your current bank or credit union, have the protection of federal deposit insurance, and the return is better than you’re going to earn on any comparable savings vehicle,” he said in favor of the accounts.
Don’t Waste Time On the Small Stuff
Like McBride, nearly every expert we asked about saving this year maintained the importance of an emergency fund, ideally in a high-yield account with automated, regular contributions. But they also warned us against the futility of chasing incremental yield increases on those accounts by shopping around, especially in today’s low rate environment. Growing your money is much more effective.
“Most people are wasting their time asking $3 questions; they need to be asking $30,000 questions,” financial expert and New York Times bestselling author Ramit Sethi told us in a recent Instagram Live.
The big picture is much more important. Spend your time questioning your asset allocation, automated investments, how to negotiate a higher salary, or how you can diversify your income and start a business.
“Yes, minimize all these unnecessary fees you pay, yes be frugal where appropriate, but do not spend the rest of your life chasing after $2 over and over again,” Sethi said.
Simple Savings Hacks Really Work
Chasing $2 savings on your daily latte or single-digit interest yields may not make a big difference in the long term, but it can still pay to take advantage of easy, everyday savings strategies. This year, one savings hack really had a lasting impact on our team.
Turns out, actually using those spending alerts offered by your bank or credit card issuer can pay, writer Ryan Haar learned. She activated alerts at personal finance expert Delyanne Barros’ recommendation.
Our editor-in-chief Adam Auriemma had a similar experience. “This year, I finally took the advice that I’ve heard many times over the years: set up spending alerts on your credit cards and look at every purchase,” he says.
Both say Barros’ description of being “hyper-aware of your spending” was motivating — and it’s worked. “I get an email every time I buy something now, and it keeps me honest,” Auriemma says. “I also get emails when unexpected charges hit — like subscriptions I forgot I had, or free trials I forgot to cancel. When those things happen, I can immediately unsubscribe.”
Just by activating alerts and keeping up with subscriptions, he says, he saved $100 in recurring monthly charges — $1,200 each year.
How to Make the Most of a Hot Housing Market
Mortgage rates dropped to historic lows this year, resulting in a competitive real estate market that allowed millions to score great prices on new homes or save money by refinancing into a lower interest rate.
And from prospective first-time buyers just starting to browse listings to longtime homeowners looking to maximize equity, we covered nearly every step in a homeowners’ lifecycle.
Public and Private First-Time Homebuyer Programs
We, like many first-time homebuyers this year, learned that homeownership may actually be a bit more accessible than it seems, thanks to first-time homebuyer assistance from local, state, and federal programs.
“As a 20-something renter, the process of buying a home seems so complicated, expensive, and inaccessible,” says writer Taylor Moore, who reported the story of Olivia Bernard, 24, a nurse from Atlanta who closed on a townhouse this year with the help of first-time homebuyer grants and programs, even amid quickly-evolving economic circumstances early in the pandemic.
“Through my reporting, I realized that homeownership can be achievable this decade by saving diligently, looking for great deals, and taking advantage of programs out there for people like me,” Moore says.
Low Rates Aren’t Everything
We also decoded some of the more complicated details of homebuying, like how an escrow account works and why appraisal contingencies are important. Among the details that stuck with writer Jason Stauffer was never judging a mortgage estimate by its cover.
“The best deal on a mortgage isn’t always the offer with the lowest interest rate,” he says. “You have to know what fees you’re paying and why you are paying them. Learning how to read a loan estimate will help you avoid paying extra for a lower interest rate without realizing it.”
All About Refis
Refinancing demand boomed this year, and became a popular topic at NextAdvisor as we learned there’s more to a refinance than meets the eye.
Again, always look beyond the interest rate. The loan’s term should be one of your biggest deciding factors, according to personal finance expert and NextAdvisor contributor Suze Orman. “Do not refinance for more than the length of your term that is remaining on your mortgage,” Orman wrote as mortgage rates dropped.
For those considering refinances this year, we also explored money-saving alternatives. “Consumers have more than one mortgage refinance option available to them, such as a mortgage recast,” says senior editor Jasmine Suarez. It requires a lump sum upfront, but this method can help you lower your monthly payment and interest paid over time.
Economic uncertainty can be a big inhibitor to traditional refinances this year, especially if you’ve been laid off or your income is unstable, we learned from mortgage experts like Dominic Turano, senior vice president and loan officer for Atlantic Coast Mortgage. “Lenders are required to warrant that you’ll be able to make the payment on the new loan, and unemployment income isn’t considered stable, recurring income,” he said.
Depending on your individual financial situation, alternatives like recasts may provide more attainable mortgage savings for those left behind as lenders tighten borrowing standards.
“I knew about traditional mortgage refis but not recasts,” Suarez says. By taking time to learn the ins and outs of these lesser-known options, “now we get to share this knowledge with our readers to help them make their next best (mortgage) money move during a time when the housing market is hot and rates are low.”
Don’t Underestimate the Power of a Roth IRA
Growing your money was another big topic at NextAdvisor this year. You probably already know how important it is to save for retirement, but how best to do it is another thing entirely. Personal finance expert Suze Orman broke down the benefits of dollar-cost averaging, and Broke Millennial author Erin Lowry wrote about the consequences of delaying investing.
But there was one investing tool that really made a splash for us this year: the Roth IRA.
“After years of contributing to conventional employer-provided 401(k) accounts, 2020 is the year I embraced a Roth IRA,” says editorial director John Puterbaugh, thanks to contributor and self-proclaimed “Roth activist” Rebecka Zavaleta, who wrote about the benefits of the retirement account.
“Because you’re investing your income, which you’ve already paid taxes on, the dollars you invest in a Roth IRA — plus the thousands of dollars in earnings they will generate over time — grow completely tax-free, forever,” she argues, unlike a traditional 401(k) or brokerage account, where your investments are taxed upon withdrawal.
“The tax advantages are clear, as Rebecka so clearly explains,” Puterbaugh says. “But another thing I like is that while I continue to contribute to my conventional work-provided 401(k), the Roth IRA diversifies my growing retirement portfolio, so I’ll have some retirement funds that come out tax-free later, while others will have grown with pre-tax dollars that will see a tax adjustment later.”
Lessons We Can Learn by Looking Back
Whether learning from our own experiences or celebrating the trailblazers who came before us, looking back on the past inspired us in different ways this year.
“After Ruth Bader Ginsburg passed away in September, I noticed a lot of people sharing Instagram posts about her and her work — and many of them noted how she helped pave the way for women to get credit cards,” says editor Samantha Rosen. The experience prompted her to write a story about the late Supreme Court Justice’s lasting impact on credit users.
“Her work back in the 1960s and 1970s set the stage for women to be considered for credit cards, independent of their sex. In fact, had it not been for her, I likely wouldn’t even be able to do a big part of my own job today: Writing about credit cards and empowering people to make the most of their personal finances. This was such a meaningful story for me to work on, and was just one small way of helping to carry on her legacy.”