COVID-19 has halted the United States economy; baby boomers’ 401k are reduced by nearly a third of their value.
Realistically a lot of people are going to run out of money during the COVID-19 health emergency. There is help available for those who cannot pay their bills, but you have to ask for it.
The first thing is first, take stock of where you are. Make a list of your necessary expenses, such as rent and bills. Then make a list of the money you have: your savings, and your monthly income.
Coronavirus has largely affected the global economy as people are staying home rather than going out and spending money. It has affected the tourism, hospitality, and entertainment industries, and a lot of Americans have lost their jobs. Casual employees will feel the financial stress a lot earlier than full-time employees who have paid sick leave.
“A lot of people don’t have a safety net right now,” said Brad Nakase, a California employment lawyer. “Statistics show that 40% of Americans don’t have enough savings to cover a $400 emergency. What will happen to these people when they have weeks of reduced work or no job at all.”
What kind of financial relief is already out there?
It can be frightening to see the bills still coming in when money isn’t, but there is no need to panic. It is important to start looking at ways to ease the financial burden. There is already some relief in place, and new bills are currently being drafted to relieve this pressure.
• President Trump signed the Families First Coronavirus Response Act. This ensures there is paid leave and unemployment benefits for those caring for a family member infected with the coronavirus.
• Home foreclosures and tenant evictions are on hold until the end of April by order of the Department of Housing and Urban Development. Other governors and ministers have put measures in place to prevent evictions for the duration of the crisis.
• Several utilities companies have agreed to waive late fees and stop shut-offs.
• Some credit card companies have agreed to waive late fees and not charge interest.
• Social services are providing aid to people who are struggling to cope. They are offering food, emergency housing, counseling, and heating vouchers. Contact United Way to see how they can assist you.
• The federal tax deadline has been extended until the 15th of July. This applies to businesses and individuals.
• Some states are offering income tax relief. You can find more information about this on the American Institute of CPA’s website.
“Communication is vital, whether you have savings or not,” Nakase said. “Contact your credit card issuer, and anyone else you owe a debt. Have an honest discussion about your finances because a lot of lenders are working on ways to assist people. They might not be publishing them on their websites though so it’s important to be proactive and ask questions. The earlier you can receive relief and assistance the better position you’ll be in to weather this storm.
What should I do first?
Sit down with your finances and work out your financial position. Calculate all expenses and the income and savings you have. The next step is to create an emergency budget which means cutting out everything but essentials to ensure the money lasts as long as possible.
According to Brad Nakase cash is king, and it is important to focus your cash wisely. He suggests taking a hard look at your finances and cut out everything that is not the bare essentials.
An emergency budget only allows for essentials such as food, utilities, shelter, transportation, and medical care. You should cut out or freeze entertainment, subscriptions, and take out. The best way to identify unnecessary costs is going through account statements and credit card bills.
“Some people don’t realize that they subscribe to multiple musics or tv streaming services,” Nakase explains. “Either reduce them down to one or cut them out altogether until things are back to normal.”
What if I am struggling to pay important bills?
If you are living paycheck to paycheck, any reduction in wages can mean you are now struggling with bills. It is important to be proactive and act before the situation is dire.
“Call your utility provider, landlord, or lender. There are a lot of emergency measures in place and companies are giving extensions or waiving late fees,” Nakase advised. “It will not only help you out short term but will also protect your credit score. If you work something out with the company, then it won’t be seen as a missed or late payment.”
A lot of utility companies have measures in place to help people cope with coronavirus related hardships. They are preventing shut-offs, waiving late fees, creating deferred payment plans, and offering emergency funds to low-income households. If your utility provider doesn’t have the information on their website, then call them.
Credit card bills
The Federal Reserve has cut rates, meaning a lot of credit card interest rates will lower too. Unfortunately, the rate cut wasn’t big enough to make much of a difference to most people.
Most credit card companies have already publicized programs they are putting in place to help cardholders. Call your credit card company and see what they can do for you. They might be able to reduce interest rates, increase your credit limit temporarily, or waive late fees.
Here are some of the programs on offer:
• Apple card is offering a Customer Assistance Program to allow them to skip their payment for March without sustaining interest charges.
• American Express has said they can waive late fees, interest charges, and return check fees for customers.
• Capital One has said they can defer loan payments, suppress fees, and assist with the minimum payment.
“It is important to avoid interest charges and not impact your credit score,” Brad Nakase explains. “If you don’t tell your credit card provider about your financial struggles, then they cannot help you. They are not providing this to people automatically.”
Brad Nakase usually encourages people to pay off their credit card balance in full every month. However, he says “desperate times call for desperate measures. It is fine to prioritize essentials over credit card bills right now.”
People can also consider signing up to a zero percent balance transfer credit card to save money in the long term. This means you don’t have to pay interest for up to a year which can help immensely in times like these. Check CreditCards.com for a list of balance transfer cards.
Alternatively, you can pay essential bills using cashback reward cards.
President Trump announced that federal student loans are waiving interest until the emergency has ended. According to Brad Nakase, not enough details have been provided.
“If a borrower has financial struggles, then they have several options for financial relief on federal student loans,” Brad Nakase said. “Unemployment deferment, economic hardship deferment, income-driven repayment plans, and forbearances are all available.”
If you have a private student loan, then contact the lender to check your options. Your lender might be offering grace periods, forbearance, lowered interest rates, or interest-only repayments.