The news surrounding the coronavirus outbreak updates constantly. Consequently, it’s important to create a plan for both your household and your finances to ensure you’ll be ready for whatever challenges you might face.
Table of contents:
- Decide If Your Budget and Cash Flow Need Adjusting
- Financially Prepare for the Long-haul
- Cut Back Expenses to the Core
- Call Your Creditors and Lenders
- Send Hardship Letters
- Continue to Make Your Payments
- Talk to an Expert About Your Options
- File Your Taxes
- Don’t Carry Heavy Credit Card Debt
- Avoid Overbuying and Overspending
- Don’t Make Non-refundable Travel Plans
- Don’t Fall for Scams
Actions You Should Consider:
Decide if Your Budget and Cash Flow Need Adjusting
While your budget likely works for everyday living, recent changes in the economy now make it a good time to reevaluate. Your budget should be flexible under your current circumstances. If your cash flow has changed because of reduced hours or a layoff, your budget should be adjusted until your income becomes more stable. Regardless of how your situation has changed, consider making these budget adjustments:
- Pause all your budgeting for “fun money” or “travel money” and reallocate to your emergency savings.
- Allocate any extra to emergency savings.
- Adjust your grocery budget to allow for purchasing two-weeks’ worth of groceries at a time. This way, you can reduce the amount of time in public places like the grocery store.
- Reallocate funds for certain expenses like gas/transportation, beauty appointments, restaurants, in-store shopping, etc. to your emergency fund because you probably won’t be spending as much in this area.
- Avoid supplementing in-store shopping for unnecessary online purchases.
- Review your other monthly fixed expenses (rent/mortgage, utilities, auto loan, etc.)
Financially Prepare for the Long-haul
Recent reports of excessive hoarding and empty store shelves might tempt you to stock up on groceries for the next three months, but rather than spending hundreds of dollars in the grocery store, save your funds. Instead, buy two weeks of groceries to abide by the recommendation for social distancing.
Hopefully, precautions the federal and state governments are taking will help prevent COVID-19 from sticking around, but nevertheless you should be prepared for unexpected expenses. Diligently plan and prioritize all of your finances for the next few months, not just your pantry.
Cut Back Expenses to the Core
One way to help prepare you for any future financial hardships is to analyze your expenses and cut out anything unnecessary. Chances are, some expenses will be cut by default, but other unusual expenses might start adding up. With nail salons, restaurants, and most stores closing, these costs will be cut for you. That said, look at some of your consistent expenses like subscriptions and memberships, to decide if you really need them.
Call Your Creditors and Lenders
On March 13th, President Donald Trump announced that interest on federal student loans will be waived for the foreseeable future. That said, make sure to communicate with your creditors to ensure you are eligible for this exemption. Rather than wait for official communications from your lender about the interest waiver, call them as soon as possible to understand your options. Additionally, stay aware of other future announcements.
You might be able to skip or defer your car payment if you’re having trouble paying your usual bills. The best way to approach this is by first calling your lender and asking what their policy is.
If skipping a car payment altogether isn’t possible, you might also be able to change your payment due date to fall either earlier or later in the month. This might not help on a monthly basis, but it could provide some extra time to get your funds together.
If you’re facing trouble in advance of your next mortgage payment, call your lender as soon as possible.
In the wake of economic impacts from the coronavirus, many lenders may give eligible borrowers the option of mortgage forbearance. This will allow you to suspend or reduce your mortgage payments. Some companies that have recently implemented coronavirus-specific plans to help their customers include:
- JPMorgan Chase
- Wells Fargo
- Bank of America
- Fifth Third Bank
- Ally Financial
- TD Bank
- Ocean First
- PNC Bank
Contact them first and then consider talking to a home loan coach to see if you can make improvements to your current mortgage situation.
Send Hardship Letters
If you’re unable to make your payments – whether they’re related to your mortgage, car, medical, credit cards, etc. – consider writing a hardship letter to your individual creditors. This helps explain any unique circumstances or hardships you might be facing that prevent you from making your payments. Learn more about how to write a good hardship letter and view our hardship letter example.
Continue to Make Your Payments
If your income hasn’t fluctuated – or even if it has – prioritize your monthly bills and continue to make your payments. While some relief options will be available, don’t skip your payments unless you have to.
As noted above, the federal government announced that student loan interest will stop accruing, but instead of just paying the principal amount, try to pay the interest that you would have paid towards your principal. Missing payments altogether can be detrimental to your credit. Your credit score can quickly decrease but oftentimes take months or even years to improve.
Talk to an Expert About Your Options
If you have built up debt or have limited savings, you are not alone. Don’t feel like you have to brave these financial changes without help. Our certified credit coaches can help analyze your finances, create an action plan and budget, and provide referrals to extra resources. In addition to credit coaching options, we also have free debt consultations to help you understand your debt relief options that can even help prevent bankruptcy.
File Your Taxes
With all the recent shutdowns, it’s important to still file your taxes if you haven’t done so already. There are free filing options on the IRS website, as well as updated information regarding policy changes in response to the COVID-19 pandemic. The IRS encourages taxpayers who are owed refunds to file electronically as soon as possible.
The IRS is still processing tax returns but has announced a nationwide payment relief for individuals and businesses. As of March 21, the due date for individual and C Corporations income tax payments and filings was extended to July 15. If you expect you’ll have a payment to make, start saving as soon as possible to meet the July 15 deadline.
What NOT to Do:
Don’t Carry Heavy Credit Card Debt
When life changes drastically in a short period of time, you might face some financial hardships. That said, you should try to avoid building upon debt whenever possible. Before you start swiping your plastic, analyze your finances, create a new budget, and talk to our certified credit coaches.
If you are faced with the need to use your credit cards, make sure you plan ahead. Before pulling any old card out of your wallet, look into your cards’ interest rates, credit limits, and late payment fees. If you can avoid it, don’t apply for a new credit card under these circumstances. Credit card applications require a hard credit pull, which can affect your credit score. After you research your options, adjust your budget to a lot for a consistent credit card payment. That way, you can ensure you’re paying down your debt as much as possible and keeping your account in good standing.
Avoid Overbuying and Overspending
While you should ensure you have some essentials on hand, it’s not necessary to stock up for months at a time. That said, rather than going to the store weekly, make one trip to the store and buy enough food and household essentials to last about two weeks. You do not have to rush to over-buy items; it’s important to know how to avoid overspending at the grocery store.
Don’t Make Non-refundable Travel Plans
If you had any upcoming travel plans, they were likely put on hold. Most hotels and airlines are actively waiving fees and rescheduling trips for you. That said, don’t be tempted to make any new travel plans right now. Some travel companies are offering low-cost deals for flights and hotels, but it’s better to keep money in your bank account for now.
Don’t Fall for Scams
Unfortunately, times of distress make people especially vulnerable to fake products, phishing and scam attacks. Because people and computer systems are stressed, they are also susceptible to hackers who are already preying on consumers and businesses. Look out for these coronavirus scams:
- Credit-related robocalls: Just hang up. Sometimes they say pressing a number will take you off their call list but chances are, they’ll just create more calls.
- IRS and Social Security phone calls: These government agencies will never call you. All of their communications will come via mail.
- Fake household goods: With the store shelves emptying of toilet paper and cleaning products, there are fake businesses saying they’ll deliver these items. They won’t.
- Illegitimate Charities: Scammers will take advantage of your generosity. Do your research before giving.
- Spam emails and texts: These scams often ask you to click a link, open an attachment or provide personal information. Be especially careful right now, even if an email appears to be from a known sender.
More Resources and Assistance for Individuals
Make sure you have the latest information from local, regional and national stakeholders. A key resource for small business owners is the Small Business Administration (SBA). More information on that is below.
Many states have shut down their Department of Motor Vehicle (DMV) Offices and have extended license expirations dates. Check with your state regulations to see if they’ve made any changes.
Resources and Assistance for Unemployment
How Unemployment Insurance Works
When you’re unexpectedly out of work, it’s important to know that there are options available to maintain a source of income. Each state has its own benefits and plans to provide for their residents. Under the current circumstances, some employees of small businesses qualify for benefits even if they haven’t been completely laid off. If you’re quarantined, work part-time or your place of work has temporarily shut down, there may be unemployment relief options available.
Where to Look for Other Work
While some businesses are forced to close temporarily, others are looking to ramp up production in a time of need. Some industries looking to hire include:
- Grocery Stores and Food Delivery Companies
- Walmart, Target, Kroger, Dominoes, Uber Eats
- Shipping and Delivery: Online shopping and trucking companies
- Online Learning
- Remote Meeting and Communication Companies
- Slack, Zoom, Microsoft Teams
- Healthcare Providers
Resources and Assistance for Businesses
Small businesses are also facing the negative economic effects of the coronavirus pandemic. With temporary closures and the unfortunate need for layoffs, business owners can find financial relief with some of these resources:
- The U.S. Small Business Administration has funds allocated for small businesses impacted. As of March 23, businesses in every state can apply online for a loan to cover accounts payable, debts, payroll and other bills the coronavirus has affected your ability to pay.
- Many state and local governments have made efforts to soften the effects as well. Check with your state’s government websites to see what additional assistance might be available to residents and small business owners.
- Check out SBA Economic Injury Disaster Loans.
As always, we are available, helping as best we can to provide relevant information and guidance. Please see our recent article, How to Prepare Your Home Amid Coronavirus Concerns, for more information. In addition, we have online calculators and budgeting courses for your assistance.
You can always access our free resources, educational tools, and chat with our staff on https://credit.org/. We also have financial coaches available by phone to help analyze your financial situation, help you find debt relief options, and create a personalized budget. We are still available, even though our work environment has changed. If you have general questions, you can reach us anytime at email@example.com or call us Monday through Friday at (800) 431-8157.