The Roaming Economist is not a legal or financial professional and any advice or opinions expressed should be taken as general information. Please read my DISCLOSURE for more information.
This may not be a comprehensive list of all federal or local relief packages depending on when you are reading this post. The information was accurate for US citizens as of the date of posting, 04/07/2020.
Right now, it feels like the world is falling apart.
Besides worrying about your health and the health of your loved ones during the COVID-19 crisis, you probably have significant financial concerns as well.
Although social distancing and self-quarantine play a vital role in keeping us all safe, there’s no denying the shutting down of society has caused a strain on your wallet – on all our wallets.
With the closing of many businesses, a lot of people are finding themselves laid off or experiencing a significant decrease in hours and income, myself included.
As if this weren’t enough, that fact that we don’t know just how long this is going to last doesn’t help. So much is out of your control right now. But what are the things you can do right now to ensure your finances last as long as possible during this tough time?
In this post, I’m going to tell you the financial moves to make during the COVID-19 crisis to help you weather this storm.
How to Buffer a Loss of Income
So, you’ve lost some income, huh? I’m right there with you. Whether you got laid-off, furloughed, or are experiencing reduced hours, here are a few things you can do to try to lessen the impact of that loss.
File for Unemployment
If you find yourself with a reduced income due to COVID-19, consider filing for unemployment benefits.
The federal government allowed states to broaden their eligibility requirements for unemployment in early March so more people could receive aid during this crisis. However, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, that much-talked-about stimulus bill, signed into law on Friday, March 27, has just expanded unemployment benefits further. This expansion will grant more people eligibility for benefits, including the self-employed and part-time workers.
What if you aren’t laid-off, but your hours and pay are significantly cut back? Any loss in income can have a severe impact on you and your family financially. Thankfully, you can apply for partial unemployment benefits to help bridge your gap in pay.
Keep in mind that filing for unemployment won’t be a fix-all for replacing your income. Although the amount you receive varies by location and pay before your job loss, unemployment benefits usually cover only a portion of your income – less than half in most instances. The state you live in determines the maximum you can collect.
Although your state benefits may vary depending on your location, the expansion passed in the new CARES Act will help your unemployment benefits come closer to replacing the income you may have lost. Those who are eligible can get $600/week in additional funds on top of their other state’s benefits that will be granted for four months, ending on July 31.
The new stimulus bill also extends your state unemployment benefits for another 13 weeks beyond the typical length of time. Most states provide 26 weeks of benefits, so this affords you three extra months to recover from job loss or reduction of hours.
Get a Temporary Job
Whether you’re still working a few days or not at all, consider getting a temporary job. It doesn’t matter if it’s full-time or part-time. Earning some form of income can keep you from completely draining your savings.
With many job opportunities shutting down, I can’t guarantee you’ll find something in your field of choice. However, the point isn’t to find your next dream job; you’re just trying to make something to get through this tough financial time.
Many grocery stores can’t keep inventory on the shelves between people panic-buying or stocking up to last through self-quarantine. This means these businesses need more personnel and are advertising for new employees to stock shelves.
At the same time, with no one wanting to leave their house, there’s an increased demand for delivery drivers. Amazon, Uber Eats, and Postmates, to name a few, are searching for more drivers. With most restaurants reduced to take-out only and the waiving of some delivery fees by these services, it’s no wonder a lot of customers are taking advantage.
Another route you could take is to get an online job in the meantime. If you have skills you can utilize while working from home, create a profile on Upwork. Upwork is a website that connects freelancers with companies who need specific projects done. Some gigs are more long-term, but they also have opportunities for short-term jobs that can help supplement your income.
Rework Your Budget
As soon as you experience a loss of income or sense COVID-19 is going to cause you financial difficulty, sit down to rework your budget.
There is so much uncertainty surrounding business closures, layoffs, and the expected duration of this crisis. You need to hope for the best but prepare for the long-haul.
The purpose of reworking your budget is to cut out every expense you can since you don’t know how long this is going to last. Cancel subscription boxes, turn off your Amazon “Subscribe & Save” orders, and stop your discretionary spending.
Go through every expense that’ll leave your account any time soon and figure out how to reduce it or eliminate it altogether. (More tips on how to deal with your higher-cost monthly expenses later.)
Once you’ve reworked your budget, look at your Emergency Fund or Rainy Day Fund to see how long you can sustain your reworked budget. The lower you’re able to get your expenses, the longer you’ll be able to get through this crisis should it last longer than expected.
Use Your Stimulus Payment Wisely
When the CARES Act passed on March 27, many of us did a happy dance that we might actually receive a check in the mail. You need help paying bills, and this federal aid could go a long way. Although these funds will take time to arrive, here’s what you currently can expect.
The amount of aid you’ll receive in your stimulus payment will depend on your income, and you won’t be required to pay income tax on it. According to the bill, payouts will be as follows:
- $1,200 – single adults making $75,000 or less
- $2,400 – married couples with no kids making $150,000 or less
- Additional $500 – for every qualifying child 16 years old and under
The higher your income is above the set threshold, the less you’ll receive until you hit the cut-off amounts:
- $99,000 for single individuals
- $198,000 for married couples
- $218,000 for a family with 2 kids
For those that qualify, having this extra amount of money will go a long way to keep your needs met while your income stream is decreased or non-existent.
Use your stimulus check wisely! I cannot stress this enough.
It may be tempting when you get a large amount of money like that to buy the new Mac book you’ve wanted or make other more substantial purchases you can’t usually afford. Think about when your tax return comes each year. Do you have the best intentions, but end up splurging on something you don’t need?
Maybe this isn’t a problem for you, and you don’t find much money slipping through your fingers. If so, then great! Your money habits will serve you well.
But make sure you’re using your stimulus money to your advantage during this financially tough time. Save your payment to help your Emergency Fund last as long as possible during the quarantine. Or if you have immediate bills you have to pay, use it for that. Just make sure you’re using it strategically to help you get through the societal shutdown.
How to Handle Larger Monthly Expenses
Decreasing expenses sounds excellent in theory, but how do you handle your high-cost fixed bills?
Seek Mortgage Relief
There seem to be several relief options put in place for individuals holding mortgages that have been affected by COVID-19.
As of March 18, the U.S. Department of Housing and Urban Development is allowing the Federal Housing Administration (FHA) to stop evictions and foreclosures for single-family homeowners with mortgages insured by the FHA for the next 60 days. All new foreclosures and the ones already in progress will stop, letting families focus on their health rather than an immediate housing need.
Fannie Mae and Freddie Mac, mortgage buyers that have been under the control of the federal government since the 2008 crisis, disclosed on March 19 how they would help borrowers who are having difficulty making mortgage payments.
Besides also halting evictions and foreclosures, both mortgage buyers are offering mortgage forbearance plans to reduce or stop payments for up to 12 months. They’re waiving penalties and late fees and suspending credit reporting of past-due payments, so your inability to pay during COVID-19 doesn’t negatively impact your credit score.
Once the crisis does blow over, Fannie Mae and Freddie Mac will work with you on a payment plan, so your monthly payment doesn’t increase once you start repaying. To read their full mortgage relief options, check out Fannie Mae’s Coronavirus help page here and Freddie Mac’s here.
These relief options will be beneficial to most Americans since Fannie Mae and Freddie Mac hold half of the mortgages in the U.S. However, what do you do if another bank or entity carries your mortgage?
Contact your lender right away to see what’s available for you. Don’t wait until you realize you may have trouble making a payment. Call the institution that holds your loan to understand what your options are if it comes due, and you can’t pay.
Most institutions understand the current crisis and are working with their borrowers to work out a plan, but they won’t know for sure you need help unless you reach out.
Contact Your Landlord
Unlike mortgage relief, initially, there were no federal plans to help renters during this time of hardship.
However, as of March 27, the new CARES Act passed, which does protect some renters. For 120 days, landlords whose mortgages are backed by Fannie Mae, Freddie Mac, or any other federal institutions are not permitted to evict tenants due to lack of payment. No late fees or penalties may be put in place at this time, either.
On a local level, some states and cities started programs to aid renters which came as a relief to many who are struggling.
According to an article by The Washington Post, Los Angeles has ceased all evictions for renters and began a citywide rental assistance fund. Oregon’s Home Forward Program, which provides affordable housing throughout the state, is allowing renters to skip payments until the end of May and repay the amount over time. Mountain View, California, has put in place a $500,000 renters assistance program.
While we can see more progress for renter assistance on a limited local level, if these programs don’t apply to you, that doesn’t mean you can’t get a break on your rent.
Contact your landlord to see if there’s any agreement you can work out. If you’re a great tenant who always pays on time and doesn’t cause any trouble, more than likely, your landlord will want to keep you and will be willing to work with you through this.
Address Your Debts
Student Loan Breaks
There’s much being discussed on the federal level when it comes to student loan breaks, even mention of partial student loan forgiveness. However, here you’ll find only information on the legislation that’s approved.
You need to know the moves you can make now, so your hefty student loan bill doesn’t devastate your finances while your income is hurting.
The president announced on March 13 that all U.S. Department of Education loans would have their interest waived for 60 days. And on March 27, he extended this period until September 30 with the passing of the new CARES Act.
This includes the following types of loans:
- Federal Perkins Loans (if not held by your educational institution)
- Direct Loans
- Federal Family Education Loans (FFEL Loans, if not owned by a commercial lender)
The 0% interest is applied automatically to your U.S. Department of Education loan, but you should call your loan company to confirm your loans are eligible. This 6-months of decreased interest goes into effect regardless of whether you’re still in school, in the grace period, repayment or forbearance.
During the time of no interest accrual, once you pay any old interest off, the entirety of your federal student loan payment will go to pay off your principal balance. Having no interest build up will take away a significant disadvantage for those unable to make payments.
Those who aren't struggling quite as much during this time will also see a substantial benefit.
You’ll be able to make additional loan payments and have the full amount knock out your principal balance, making your payments more effective at wiping out your debt.
In addition to not having interest accrue, you can also apply for administrative forbearance to have your payments halted until September 30. Any borrower already 31 days late on student loan payments will be automatically placed in this administrative forbearance. If you’re current on your payments, contact your loan servicer to apply if you feel like you’re going to need it.
It’s safe to say, if you have federally held student loans, now is NOT the time to look into refinancing them. Even without considering the talk of potential loan forgiveness, the benefit of 0% interest and administrative forbearance is too valuable to lose right now. Get through this crisis and see what other legislation may come out of it to help those with federal student loans before making any significant changes.
If you’ve previously refinanced your federal student loans or have had privately held student debt from the beginning, you aren’t eligible for the 0% interest or administrative forbearance. Reach out to the company holding your loan to see what options they could offer you.
I refinanced my loans in 2018 to get a lower interest rate. I contacted my loan company to let them know I may have difficulty making payments if this continues for more than a month. They granted me a 3-month disaster forbearance. This won’t count against my credit or the allowed number of total forbearance months throughout the life of the loan.
Unfortunately, interest will accrue during these three months, but having this option is better than being forced to make considerable loan payments while we’re not making much money.
Auto Loan Relief
The relief available on your auto loan payments is something else that will be determined by the institution. Most banks are dealing with this case-by-case as borrowers call in to ask for assistance.
Many lenders are doing what they can to help loyal customers during this difficult time. An article by Motley Fool states Ally Bank and Capital One are allowing borrowers to suspend loan payments for up to 120 days without late fees or a negative impact on their credit.
Most banks aren’t making any blanket statements on how they will aid borrowers during this time, so you need to reach out to the institution that holds your loan.
Credit Card Debt
If you have credit card debt, your credit card company might be offering some debt relief during this time, like waived late fees or deferred payments. Although assistance will vary by company, many credit card issuers are understanding and willing to work with people.
American Express, Capital One, Bank of America, USAA, and more have released information regarding available relief. Read this article by Credit Karma to see how these 17 credit card companies are responding to COVID-19. You may be able to get deferred payments, credit limit increase, collection forbearance, or deferred payments.
Tackle Insurance Payments
If you have large insurance bills you pay once or twice a year that’ll be due soon, contact your insurance provider. Malpractice, homeowners, and auto insurance are some insurances that you may have chosen to pay in a big lump sum annually to save on the overall cost.
Of course, that amount appears harder to pay now that you’ve been laid off or gotten your hours reduced. Even if you don’t make larger annual payments, you may be worried about paying your regular monthly bill on your insurance premiums.
Some companies are extending deadlines without penalties, offering to make special payment arrangements, and waiving late fees.
Of course, this is per the institution and many are taking it on a case-by-case basis, but it’s worth reaching out to see what you can do.
Call Your Utility Providers
Although most may not consider utility bills to be a relatively large monthly expense, it is a cost in your budget where a lot of help is available right now.
Many utility companies are reaching out to customers to let them know they won’t shut off their electricity or internet if they have difficulty paying. They’re urging customers to call, let the utility company know, and work out a plan to get them through these times.
If you’re having trouble paying utility bills, contact the company directly as soon as you realize you won’t be able to make payments.
How to Keep Your Small Business Afloat
Don't Completely Shut Down
First, I’d like to say this is only an option for your business if you can do it safely.
This won’t be a choice for every small business. Bars, clubs, amusement parks, and any other company that would require many people gathering in one place or ignoring the rules of social distancing should do what they can to stop the spread of COVID-19.
However, there are ways small businesses can keep at least some of their operations safely running to decrease the financial impact of this crisis. After all, when you’re a small business owner, you aren’t worried about just your income and expenses, but those of your employees as well.
Does your business have an online presence? If your business is such that you have an online store, start doing more online advertising to get internet sales up.
Restaurants, keep serving take out and consider joining a food delivery service like Waitr or Uber Eats if you aren’t already signed up. If your restaurant isn’t generally associated with take-out, like the fast food places are, use your social media accounts to let your local area know you’re open for delivery.
Think of ways you can keep parts of your business running to help soften the financial blow to yourself and your employees.
Review Small Business Relief Options
If you need money to keep your business going while it’s operations are reduced, consider taking advantage of the SBA Economic Injury Disaster Loan Program. The Small Business Association is offering low-interest loans to small business owners and non-profit organizations to help them pay overhead costs like payroll, debts, accounts payable, and other bills. Loan repayment schedules will vary by business.
With the passing of the new CARES Act into law on Friday, March 27, small businesses may be eligible for forgivable loans. It allows small businesses to take out SBA-backed loans from local banks or credit unions to cover necessary operating expenses. Parts of this loan would not have to be repaid, including money spent on paying employees, utilities, and mortgage/rent.
Don’t forget to check local news about small business assistance in your area as well. Many cities are being flexible on certain restrictions, such as advertising limitations to help businesses gain more local visibility. State and local programs for small businesses may also be in place in your area. So stay updated and take advantage of any opportunities.
San Francisco, Los Angeles, Denver, Florida, Chicago, Michigan, New York City, and Oregon all have implemented state or city assistance programs to help local small business owners stay afloat.
Amazon and Facebook have also started relief funds for small businesses with the Amazon Neighborhood Small Business Relief Fund and the Facebook Small Business Grants Program. To discover who is eligible for these programs, read this article in Forbes.
How to Navigate Tax Season
This year April 15 will be like any other day. The deadline for tax return filing and payments of owed taxes has been moved back 90 days until July 15.
What does this mean for you?
You can file any time you’d like before the due date, just like you can each year before April 15. However, any taxes owed won’t be due until July 15, and you won’t incur any late penalties as a result.
Go ahead and file as soon as you can. If you receive a return, you can use that money to help you during this financially difficult time. Put the extra money in savings or use it to pay bills until your employment and income are back to normal.
If you owe taxes, there is no downside to filing early. Any owed taxes aren’t due until July 15. If you have to make a payment, you can wait until then, so you keep as much in savings as you can and give yourself time to recover financially.
How to Protect Your Investments
Whether it’s your retirement or brokerage account, you’ve probably taken a hit lately as the stock market’s gone down. As a result, many people are worried about a potential recession.
But it’s important to remember that the average stock market return over time since it’s creation in 1896 is around 5.5%. Although the market fluctuates, try not to panic when it’s on a downturn. The market will rebound. It rebounded after the 2008 recession, and if we enter another recession, it’ll bounce back again.
Admittedly, younger investors are in a better position to recover from a dip in the market, but that doesn’t mean you’re out of luck if you’re close to retirement. You just may need to shift your asset allocation or adjust your financial plan. Contact your financial adviser to help you navigate any changes you may need to make to your retirement game plan.
If you can't handle seeing the value of your investments decrease, don't keep looking at them.
You may want to check in occasionally, but continuously doing so is only going to make you worry. Causing yourself financial stress like this will tempt you to panic-sell for fear your stocks will plummet more. However, more than likely, those stocks will recover, and all you did was buy high and sell low, ensuring you lose money.
The one good thing about a stock market downturn, or potentially entering a recession, is that the price of stocks goes down. I know that doesn’t sound like it makes sense; that’s a bad thing. Yeah, it is for the investments you’ve already purchased, but it can also work to your advantage when buying new investments.
Think about it like this: all the stocks are now “on sale”. Since the stock market tends to go back up and give you a profit over time, why not buy investments now and watch your money grow when the market levels back out. If you have the means, keep buying stocks, bonds, mutual funds, ETFs, etc.
Invest when the market is good and invest when the market is bad. Consistent action will help you get to retirement safely. You can’t game the system. Just keep doing what you were doing beforehand.
The CARES Act & Your Investments
The CARES Act has temporarily altered some of the rules surrounding your retirement accounts. These adjustments allow you to access your retirement funds more easily in case you need to take money out.
Here is a summary of all the new changes:
There will be no required minimum distribution from retirement accounts for 2020, which means you don’t have to sell your stocks at a loss. For those who don’t know, a required minimum distribution is the amount of money that must be taken out of a SIMPLE, SEP, or traditional IRA each year for those of retirement age.
You can withdraw up to $100,000 out of your retirement accounts without the 10% early withdrawal fee. You can spread out the income tax you have to pay on this withdrawal over three years from the day you took it out. Also, you’re permitted to put the money back into your accounts if you do so before the three years are up.
The new bill allows you to take a loan out against your retirement plan for an amount of up to $100,000. Usually, you can’t take out more than half your balance or $50,000 (whichever is less), but this new law makes an exception.
Not everyone has an Emergency Fund, and even if you have one, it may not last you through this crisis.
In fact, we just got our Emergency Fund stocked enough to cover a month and a half of expenses when all this hit and, more than likely, our reduced income during this crisis will drain it all.
If you have to remove money from your retirement accounts to not go into debt, take advantage of these relaxed rules, but I advise this to be your last resort. Raiding your retirement fund now will cost you more down the road.
Cut your expenses, and find ways to supplement your income. Take advantage of loan deferment options, and save any extra money you receive right now.
There will be people who don’t have a choice but do everything you can, short of going into debt, not to take money away from your retirement.
There’s a lot mentioned in this post, but I want you to choose three things to do right now that will help you cope financially with the COVID-19 crisis.
By taking action before or as soon as you sense difficulty, you can prepare yourself and your finances early in case the health crisis lasts longer than we anticipate.
This may not be a comprehensive list of all federal or local relief packages depending on when you are reading this post. There is a lot of legislation the federal government is negotiating, revising, voting on, and throwing out.
If you know of other areas of available relief not mentioned in this post, please comment or drop a link below. Supporting each other and communicating where help is available will get us all through this difficult time.