For the last several weeks, our vibrant, active country has been put on pause. Busy thoroughfares are now empty of pedestrians and vehicles, as millions of Americans have been sheltered in place to slow the spread of the coronavirus. Forced leave of work has left many wondering if and when they’ll receive their next paycheck.
If you are one of the millions of Americans laid off from work we may be able to help you better manage your finances during the weeks ahead.
Focus on Essentials
Much of the uncertainty related to COVID-19 is the fact that you don’t have all the information — no one does. No one knows how long the outbreak will last, the impact it will have on the world, or what it will mean for your workplace moving forward. During this time, it’s wise to focus your spending on essentials only.
Begin this process by identifying which expenses are essential, such as mortgage or rent, food, utilities, medical expenses, etc. and which are non-essential expenses. Identifying non-essential expenses means pinpointing areas where you can cut costs.
First, and most importantly, resist the temptation to shop online out of boredom or depression. These activities can be destructive to your budget. Second, begin looking for other ways to cut expenses. Subscription services, which can add up quickly, are a great starting point. However, also consider expenses you likely will not utilize soon, such as gym memberships and other entertainment expenses.
There are areas where you can cut back on expenses even at the grocery store. For instance, think of buying food in bulk or larger quantities to not only save money but to save trips to the grocery store. Many libraries, schools, and other companies are stepping up and offering free streaming services to keep young children entertained during this trying time. Take advantage of available free services.
It’s one thing to resolve to put your housing needs first and another to actually put that into practice when you’re working with a smaller or no paycheck this month. The good news is that some rules have changed in light of the financial fallout of the pandemic.
Also, in early March, the Federal Housing Finance Agency offered payment forbearance to homeowners affected by COVID-19, allowing them to suspend mortgage payments for up to 12 months. These loans, provided by Freddie Mac and Fannie Mae, account for approximately 66 percent of all home loans in America. The payments will eventually need to be covered. A free pass on your mortgage during the economic shutdown can be a lifesaver for your finances and help free up some of your money for essentials. Be sure to speak to your lender about your options before making a decision.
Paying for Transportation
When normal life resumes, many employees will need a way to get to work. Missing out on an auto loan payment can mean risking repossession of your vehicle. This should put car payments next on your list of financial priorities. If meeting that monthly payment is impossible right now, communicate with your lender and come up with a plan that is mutually agreeable to both parties.
Utility and service bills should be paid on time each month, but for those who aren’t working at this time, these expenses may not even make it to their list of priorities. First, don’t worry about shutoffs. Most states have outlawed utility shutoffs for now.
Second, many providers are willing to work with their clients. Visit the websites of your providers and check to see what kind of relief and financial considerations they’re offering their consumers at this time.
It’s important to note that lots of households receive water service directly from their city or county, and not through a private provider. Many local governments have suspended shutoffs, but be sure to verify if yours has done so before assuming it to be true.
Finally, as with every other bill, it’s best to reach out to your provider and be honest about what you can and cannot pay for at this time.
Consider Short-Term Loans vs. Credit Cards
Finally, your credit union remains dedicated to helping the community grow, particularly in trying times such as these. A short-term, personal loan from the credit union is a great option to help you get through, rather than using traditional credit cards that offer revolving credit at a higher interest rate.
Short-term loans, such as personal loans, have set payment terms and are easier to repay than credit cards and payday loans. Not only will you pay less interest, but you’re likely to repay the debt much faster than with credit cards, too.