11 ways to improve your financial situation during a crisis

The coronavirus pandemic has dealt a severe blow to the economy and personal finances of workers across the country. Experts predict that the total number of unemployed Americans can reach a whopping 47 million. Of those who have not yet lost their jobs, many reduce their wages or working hours, as business owners try to stay afloat, recalls GOBankingRates.

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Regardless of whether you lost your job or encountered other financial difficulties, there are several effective ways to improve the financial situation during a crisis.

View your budget

Do this to know exactly how much money you have and how much you need to cover basic needs.

“A budget is the key to feeling financially secure right now and determining whether you can make ends meet,” said Tony Drake, CFO and founder of Drake & Associates. — Write down the budget. List all expenses, including fixed expenses such as your mortgage, car payment and cell phone bill. It should also include variable expenses such as utilities, food and entertainment. Then determine how much income you earn. If your expenses outweigh your income, you'll have to take a hard look at where you can cut back, even if it's temporary."

Reduce as many unimportant costs as possible

“During these unprecedented times, there are many things you can't control, but you can manage your savings and spending,” said Lindsey Sacknoff, head of consumer deposits and payment products at TD Bank. “Today’s financial decisions will provide a cushion that will help you plan for what may lie ahead.”

To this end, she recommends cutting down on discretionary expenses—any expenses for groceries, prescriptions, rent, and utilities.

"By eliminating any essential items from your budget, you can easily save several hundred dollars in the coming months," Sackoff said. “Suspending your gym membership, canceling a service you never use, and cleaning your home instead of a cleaning service all work.”

Reevaluate costs for some needs

While it's best to cut down on non-essential expenses, you can also factor in spending on some needs in your budget - although those "needs" may look different now than they did in the past.

“By taking into account spending on essentials such as transportation or child care, you can reallocate these funds to new “needs” such as buying games for your children at home, or online streaming services for TV and movies, fitness classes or a meditation app,” said Shelley-Ann Eweka, director of asset management at TIAA. “In addition to protecting your wallet, it’s important to prioritize the mental health of you and your family in this new reality.”

But set a budget for situational expenses

"While it's easy to assume that quarantine will automatically cut your spending, food delivery and online shopping may cause us to quickly rack up credit card bills," says Lauren Anastasio, CFO of SoFi, a personal finance company.

She recommends setting a new budget that takes these situational costs into account.

On the subject: Over 10 options: how to get financial assistance in the USA during the COVID-19 pandemic

Try to reduce fixed costs

"Look at your utility and insurance bills to make sure you're getting the best rates," said Howard Dworkin, chairman of Debt.com. “Save water, electricity or gas in a way that’s good for your wallet and the environment.”

View your savings

Find out how much savings you have in savings accounts, emergency funds, retirement and other accounts.

Drake recommends asking yourself: will you need to use your savings to make ends meet? If so, what options do you have and how will each affect your financial future?

Put as much as you can while you can

“As we enter a potential period of unemployment or reduced income, we want to have as much financial cushion as possible,” Anastasio said. “If you haven't already taken a pay cut, been laid off, or otherwise had your income cut, do everything you can to raise as much money as possible with the income you still have.”

Create an emergency fund

“As the COVID-19 pandemic makes clear, a financial shock can strike suddenly,” said Greg Klingler, director of wealth management for the Government Employees Association. - An emergency fund is an important part of your budget, and you may need to contribute a little less to your savings (retirement or debt payments) and/or desires (entertainment, clothing, etc.) to create and fund it. All Americans should maintain a fund of 3-6 months' worth of necessary expenses in cash."

Set priorities for debt repayment

“It can be difficult to pay off debt obligations on top of your other bills, but you should try to manage high-interest debts, such as credit card debt,” Drake said. “We spend most of our money on high-interest debt, so don’t let it pile up right now.”

Drake recommends using the avalanche method to pay off existing debts: “Start by arranging the payment of your debt at the interest rate. Set priorities in the direction of debt with the highest interest rate, while leaving the minimum payments on the rest. Once this debt has been paid, go to the next highest interest rate. ”

Continue to contribute to pension savings

Covering basic necessities and setting up an emergency fund should be your priorities, but if you can continue to contribute to your retirement savings, you must do so.

“Many people are facing difficult circumstances that require them to temporarily reduce or stop their retirement savings,” Eweka said. “However, you should continue to invest as much as possible into your retirement. Perhaps this means allocating funds you've been saving for the coming months, such as children's sports or extracurricular activities, and putting those expenses into savings."

Keep calm and invest

With all the volatility of the market, it is tempting to make money on your stock portfolio before the values ​​get even lower, but Klingler advises against this.

"While you and your financial advisor should periodically evaluate and carefully consider your portfolio balance, it's important to remind yourself that you're not playing games: you're investing for the long term and for your long-term financial security," he said. — Patience is truly a virtue when faced with constant stock market volatility. “Unfortunately, I have seen a large number of clients make emotional, rash decisions during market turbulence, only to see quick backlash that undermines their long-term financial security and sets them on a very difficult path.”

On the subject: 8 steps to take if you have financial problems due to coronavirus

What to do if you have lost your job or your income has decreased

As a result of the coronavirus pandemic, many Americans were temporarily unemployed, went on vacation, or faced wage cuts, so they may have to take additional steps.

Call your credit card company if you are late with payment

“Quickly prioritize which bills you can pay this month. In some cases, it is simply impossible to pay for them all. If you find that you can't make a credit card payment, call your credit card company and see if they can give you more time and waive any interest, advises Eveko. “This may give you a little more time to get help.”

Talk to all your lenders

In addition to your lending company, talk with other lenders to find out if they can offer assistance.

“Many lenders are willing to offer you payment modification or even deferment options on some of your largest expenses, including your mortgage, car loan, student loans, etc.,” Anastasio said.

Apply for unemployment benefits

If you lost your job, apply for unemployment benefits as soon as possible.

“The coronavirus relief bill strengthened unemployment benefits,” Klingler said.

According to the bill, the federal government will give the unemployed an additional $ 600 per week in excess of their benefits for four months. But be prepared for the usual two-week waiting period before you receive your first money.

“Filing for unemployment benefits has a waiting period of typically seven days, and filers can expect an additional seven days for their first check/deposit to be processed,” Klingler said.

Consider obtaining a Home Equity line of credit

If you do not have enough financial pillow to survive the loss of work, and unemployment benefits are not enough to make ends meet, you will need to find additional sources of income. Klingler said your line of credit should be your first choice.

“If you have equity in your home and an open HELOC, you can get exposure to this equity,” he said.

Withdraw your plan 401 (k)

If a HELOC isn't an option for you, you may want to consider borrowing from a 401(k) retirement account.

“The new coronavirus relief bill allows individuals under age 59,5½ to distribute up to $100 from their 000(k) without paying a 401% penalty,” Drake said. “Be sure to talk to a financial professional about your options before withdrawing money from retirement accounts.”

Take out a personal loan - but read the fine print

You may need to take a personal loan or a line of credit at this time, but do not rush to accept the first offer you receive.

“Do your research and read the fine print,” Drake said. — Fees and interest rates can add up quickly, so it's important to understand what you're signing up for. Explore other options before agreeing to any form of loan.”

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