COVID-19 is ravaging the economy and leaving people panicked. Businesses are shuttering, markets are unsteady, and investors are becoming increasingly risk-averse.
Fortunately, aid programs abound to help Americans weather the COVID-19 financial fallout. From the temporary pause on student loan payments to the stimulus package distributed to all Americans, both the government and private actors are doing their parts to help. Not to mention, the new work-from-home culture has found many of us rich in time (if not in funds) and suddenly free to take on neglected personal development, home improvement, and creative projects. With so many nonessential items crossed off our schedules, we can shift our attention to some “spring cleaning” – not only in our homes, but also our finances. In fact, it’s prudent to shift our attention to our finances, particularly if we are in debt or work in an industry with high turnover rates.
No matter your situation, here are five simple steps you can take in your spare time to prepare financially for the pandemic’s financial fallout.
Now is The Time to Beef up Your Savings
This is not the time to get risky with your investments. Rather, it’s an ideal season to focus on accumulating liquid funds – those you can draw upon in a time of emergency (like an imminent layoff).
To do so, radically cut back on your nonessential expenses. Even while quarantined, temptations – like online shopping – are rampant. Divert the money you would have spent on entertainment or small luxuries into a savings account. Some financial experts recommend accumulating six weeks of pay, but some are better than none – so if you are starting from $0, that is okay. The key is to set up a high-yield savings account with a high-interest rate, so you can make your money work for you.
Re-evaluate Your Health Insurance
If you’ve cast a blind eye to your insurance policies, now is the time to get smart: Pull out your plans and comb the fine print. Make sure you understand your coverage and if you are overpaying, take a razor to your plan to save money. If it is a high deductible plan, you may want to create some breathing room in your budget to cover the deductible in case you need treatment. And if you are uncovered, consider applying for insurance now, before you become ill or uninsurable.
Also, take a look at your long term disability plan. If you don’t have disability insurance, consider applying for it, particularly if you or your partner are likely to face a layoff.
Take advantage of Optimal Loan Financing Options
Resist the temptation to avoid your bills or bury your head in the sand. Rather, call your lenders to see if they can work with you if you’re struggling to make your payments. There are numerous debt relief options out there for you if you need to take advantage of them. For instance, some lenders will waive interest. Others will work with you on a case by case basis to adjust your payment timeline. The key is to show them that you are honest, trustworthy, and willing to follow through, and they will likely respond in kind.
If you have federal student loans, take advantage of President Trump’s temporary waiver on loan interest. Additionally, consider other options that are currently available to borrowers in need of relief. Some private lenders will be willing to cut back on – or waive – your interest or even temporarily pause your payments. Keep a record of your communications with them, and furnish any and all documentation they need in order to fulfill your request.
If you take advantage of these benefits, however, keep in mind that once the fallout from the pandemic resolves, you will likely be financially responsible for the payments you still owe, so ensure you are prepared to cover them.
Check Your Credit Report for Errors
Even if making a large purchase – like a home or a vehicle – is the last thing on your mind right now, there will be a day that it matters again. A strong credit score can help you, and an error can unknowingly hamper your ability to make the purchases you want. As such, use some of your spare time to check your report for errors.
To do so, pull your report from all three credit bureaus and scan it for these common mistakes:
- Clerical errors, like misspelled names or addresses
- Loan or credit card payments applied to the wrong account
- Accounts reported more than once, making it look like you have more open lines of credit than you actually do
- Old bad debts (more than 7 years old) still appearing on your account
To correct these errors, contact the credit bureaus and the organization that provided the information to the bureaus in the first place. You can initiate a dispute online through all three of the bureaus. When you create the dispute, make sure you clearly identify the items you are disputing and provide supporting documentation. They will investigate the errors and usually respond within 30 days. As always, keep a record of your correspondence with them.
Now isn’t the time to keep that fancy gym membership or wine club card. Cancel subscriptions for frivolous or nonessential pursuits like workouts, meal plans, or beauty splurges and divert those funds into a savings account. Additionally, see if you can score a refund for any unused services, and check your statements to ensure you are not continually charged. There will soon be a day you can resume enjoying these splurges, but for now, building up a robust savings account may carry you through a recession or a period of unemployment.
Save, Save, Save
A global pandemic and impending economic recession are scary, but with a little preparation, you can do the lion’s share to secure your financial future. Start by saving more than you spend, tracking your expenses, cutting where you can, and staving off stress by limiting your media intake – sometimes, continually scanning doomsday headlines can make a bad situation feel worse.
Ultimately, take the situation one day at a time. Use your spare time wisely to organize your priorities, then relax. Like any bad situation, this will come to an end.