What To Do If You’ve Depleted Your Savings Over the Last Year

Young brunette curly female reading her bill papers, looking stressed.
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The coronavirus pandemic has led to millions of Americans losing their jobs, and oftentimes, unemployment income alone just isn’t enough to make ends meet. As a result, some Americans may have depleted all of their savings to make it through 2020.

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A survey conducted by CNBC+ and Acorns last September found that 14% of Americans — up to 46 million people — had wiped out their emergency savings since the start of the pandemic. And a survey conducted by the Transamerica Center for Retirement Studies last May found that 15% of Americans had already dipped into their retirement accounts to cover living expenses, and an additional 13% planned to do so.

If you’re one of the millions of people who now need to rebuild their savings from scratch — while making ends meet in the short term without piling on debt — you may not know where to begin. Here’s what financial experts say you should do.

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Build a Basic Budget

If you’re struggling to make ends meet right now, you may not have anything left over to contribute to savings. But you need to have a clear picture of your financial circumstances before you can make any moves to improve them.

“In the short term, take a look at what you have coming in, what’s going out and what’s left over,” said Andrew Meadows, senior vice president at Ubiquity Retirement + Savings. “Those are the three basic questions for building a budget. By not spending more than you have, you won’t be piling on to the debt.”

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If you lost a job and are newly employed, you need to review your budget based on your new income.

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Cut Down on Your Spending

“Look at your spending,” Meadows said. You may be able to find creative ways to cut costs: “Many have been cooking at home more in an effort to save money and learn a new skill. Perspective is all you need to change the frugal to the fruitful.”

You should also distinguish between your discretionary and nondiscretionary spending to find areas where you can cut back.

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“Review discretionary to see where you can save more and begin setting cash aside into an emergency fund account,” said Michael Cocco, financial professional at Equitable Advisors.

You may also be able to save on your nondiscretionary spending.

“Look deeper into your fixed expenses to ensure you are getting a competitive rate for things like home and auto insurance, and utilities such as electric, gas, cable and cell phone,” said Stacie M. Mastin, vice president and wealth advisor at Tompkins Financial Advisors. “These are often areas where you can cut back on your monthly bills, but you have to take the initiative to engage in negotiations with these companies.”

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Prioritize Savings — as Soon as You Are Able To

“Financially, it’s important to focus on income before worrying about replenishing savings,” Meadows said. “That can be worried about later as your new budget is defined. What is important is to start this process is figuring out what you can afford. With all the bills you’ve got to pay, don’t forget the all-important savings ‘bill.’ Thinking of your savings as a monthly commitment you can ease into.”

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Take the effort out of saving by automating it.

“Much like auto-bill pay, you can set regular automated savings from your checking to your savings account through your bank by setting it and forgetting it until you’ve reached your three- or six-month savings goal,” Meadows said.

After you’ve built back an emergency fund, focus on distributing your savings back into any other accounts you may have depleted — and better yet, open new accounts that help build your equity.

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“Sweep funds from the checking account to various equity-building buckets,” said Ashvin Chheda, president of Opes One Advisors in Addison, Texas. “Set up 401(k) contributions, IRA/ROTH contributions, 529 college savings buckets, regular brokerage investment accounts, etc.”

You should also save any financial windfalls — like your recent stimulus payment, if you qualified for one, and upcoming tax refund — rather than splurge on something that’s nonessential.

“Commit to yourself ahead of time — before that money hits your bank, how much of it do you want to put into savings?” said Amanda Utevsky, PhD, senior behavioral researcher at Common Cents Lab. “Even a little can go a long way, and deciding for yourself now before you have a chance to touch the money can make a big difference when the check finally comes.”

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Last updated: Aug. 23, 2021


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