Manage Money in a Crisis
The global pandemic has completely changed the world around us. The economy, in particular, has experienced detrimental blows.
Unemployment numbers have reached record highs since the Great Depression. Well over 30 million Americans have filed for federal assistance since March. Nearly one in five people expect their incomes to decrease in the next six months. Businesses both big and small are struggling to survive. Major events that stimulate local economies like concerts, festivals, and fairs are being canceled. Countrywide shutdowns and a rapidly increasing number of job losses have urged the need for government relief programs and temporarily delayed consumer spending.
Not to mention how much it has changed the day-to-day lives of individuals. States declaring stay-at-home orders and permanent layoffs have many families struggling financially. Many are living off of a fraction of their previous income, struggling to pay bills and make ends meet and aren’t sure where to turn.
COVID-19 has flipped economies and lives upside down across the world. But, all this you already know. What you might not yet know, however, is how to manage your own finances through a global financial crisis.
When money is tight when the economy is paused when the future is uncertain. These are the times in which money management is a skill to be mastered. Don’t let a global crisis control your financial fate. Take charge of your money and make smart decisions by considering some of these tips.
1. Look Into Mortgage Relief
Due to the vast amount of homeowners who have experienced layoffs or pay cuts as a result of the current pandemic, many can’t afford to pay their mortgage. On the bright side, lenders are not ignorant to the financial stress Americans are under. The CARES Act enabled mortgage relief programs that give homeowners more time to pay their monthly bills via forbearance. However, it’s important to note that forbearance terms and eligibility vary depending on your loan type. For example, government-backed loans through the FHA don’t have to be paid back all at once, while forbearances approved through other banks or financial institutions might have different guidelines after the 180-day grace period. If you’re not sure if mortgage relief is available to you, reach out to your loan servicer for more information, as it could be extremely helpful when incomes decrease.
2. Learn About Other Relief Programs
Comparable to mortgage relief, other programs have been implemented to soften the economic blow of individuals. For example, the government has granted a suspension on all principal and interest payments for student loan borrowers up through September 2020, which will spare you another bill if money is tight. The CARES Act is also the source of the recently distributed stimulus checks, also known as Economic Impact Payments to provide additional relief. For non-government loans like car loans or other debt, you can contact your bank to learn about postponing payments or request a repayment plan. To learn more about available types of relief during the pandemic, visit this page for a comprehensive guide.
3. Keep Your Spending to a Minimum
When life seems so out of your control, you may find comfort in knowing that you can grab ahold of the reins on your own household’s spending. Shelter in place orders may have forced you to realize that you can live without some of the things you were paying for before such as a gym membership or going out to eat. Instead of continuing to pay for services you no longer need post-coronavirus, try working out and cooking at home more, or replacing cable with a cheaper streaming service. Or, look for ways to reduce existing bills you can’t avoid, like refinancing your mortgage or student loans. That way, you can spend less now and put more toward your savings account.
4. Bulk Up Your Emergency Fund
The current pandemic has proven that job security is never guaranteed and that you need to be prepared financially for situations like a global crisis or a dip in income. Any money that you’re keeping in your pocket as a result of shutdowns, cancellations, forbearances, or postponements should go straight to your emergency fund. If you’re lucky enough to gain access to any additional income at a time like this, like a stimulus check or a tax return, be sure to allocate as much as you can into your savings account. That way, any bills that you cannot get suspended or postponed will get paid, and you won’t fall too far behind and drown in debt.
5. Lend a Helping Hand
If you have the means and are fortunate enough to have not been laid off or furloughed, there are plenty of ways that you can do some good financially at a larger scale. There are many small businesses that are struggling to support themselves, and ultimately, their families because of the economic downturn. When you do eat out, buy from some of your favorite local restaurants who have seen a dip in traffic since disallowing dining in. And, tip generously, as the majority of these workers’ hours have been cut and could be having money troubles themselves. After all, small businesses are critical to the economies, making up for 99.9% of all businesses and employing 58.9 million workers, so it’s crucial that we keep them afloat throughout this crisis.
Rather than thinking about all the things you can’t do because of COVID-19, keep all the ways you can control your financial future top of mind.