"Periods of transition can seem really uncertain, especially when our livelihoods are impacted. Even with parts of the country looking like a return to normal, many of us are living the reality that the economy is not. That realization can take a toll on our finances. With life feeling various degrees of up in the air, taking concrete steps to get your finances in place can bring some comfort.
Start with thinking about income and job stability. Is your income or your job is at risk? Risk can take a lot of different forms. It can be an outright loss of work in your family, or reduced hours. But it can also appear as taking on increased costs for transportation or childcare to accommodate changing work schedules. A lot of us are finding ourselves in one of these scenarios.
If you’re just upping rainy day planning
Cut expenses: It’s essential to know where your money is going. Now is a great time to review your spending habits. Do you know where every dollar is being used? Since many of us have slimmed down our out-of-the-house activities, it’s also a good time to cut any discretionary expenses. Alternatively, identify exactly where you’d trim back if you had to quickly pull the spending rip cord in the event of an income loss.
Save with a strategy: Some of that expense reduction can be reallocated to savings. Now is also a good time to know exactly what you’re saving for. Instead of a lump sum rainy day fund, do a little more strategic planning for your savings. Which bills would you need be sure to cover in the short term if things went south?
Revisit your debt pay-down strategy: This will be a highly personal decision. However, you may decide it’s a good time to re-negotiate and pay down debt. You may also want to put more payments toward principle if lenders are offering suspending interest charges on certain types of credit, as is happening with some student loans.
If you’re already struggling
Assistance: If you haven’t yet gotten familiar, be sure you understand all of the public services on offer right now. From the federal down to the local level, support programs look extremely different depending on your industry, city, and particular circumstance. Check out 211.org to learn about resources in your community like food banks, meal services for students, or mental health services.
Forbearance and rent help: This is another place to get familiar with what your local regulations are proposing. Know your rights as a renter or homeowner, and become familiar with any opportunities to revisit your current payments. The Consumer Financial Protection Bureau has great resources on understanding your options around housing assistance.
Prioritize bills: When finances are difficult, it can become important to understand how to time your bills and which bills truly need to be paid immediately. Take full advantage of any grace periods during this time, many of which are extended because of the current economy. A number of consumer financial literacy organizations are also aggregating references and resources.
If you see a job or income loss on the horizon
Prepare to apply for unemployment: A lot of narrative surrounding unemployment benefits has been hitting the headlines. Don’t let it scare you off from the important process of researching and applying for these benefits when the time comes.
Know how you’d use savings: If you’re going to draw on rainy day funds, start to think about how you’d budget those resources. What lifestyle changes will you want to make to ration them appropriately? How many transfers can you make out of your savings account without penalties? Preparing for new habits and understanding the spending logistics of your emergency savings is essential.
Slow down debt repayment: If you’ve been aggressively paying down debt or contributing to longer-term investing objectives, now is a good time to revisit those plans and taper back. Once you’ve stabilized your financial picture in the short term, it will be much easier to revisit the financial goals of future you.
Be hyper-conscious of your financial security
Lastly, looking out for fraud is another really critical financial action item right now. We are all in various stages of distracted, worried, and fatigued, as well as being compelled by the many social challenges we’re witnessing as a result of the crisis.
This is ripe ground for fraudsters to try to elicit money from you under the banner of supporting an important cause. And, all this screen time and daily stress is causing our cyber hygiene to get a little lax. Stay safe by keeping on top of password updates, update your security software, and always use good practices when checking emailed links or responding to messages.