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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.

Photo: Shutterstock

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.

“Budgeting 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. - Describe the budget. List all expenses, including fixed ones, such as mortgage, car payment and mobile phone bill. It should also include variable costs, such as utility bills, food, and entertainment. Then determine what income you receive. If your expenses outweigh your income, you will have to carefully study where you can cut back, even if it's temporary. ”

Reduce as many unimportant costs as possible

“In these unprecedented times, there are many things that you cannot control, but you can manage your savings and expenses,” said Lindsay Sacknoff, Head of Consumer Deposits and Payment Products at TD Bank. “Today's financial decisions will create a pillow that will help you plan what may come.”

To this end, she recommends reducing optional costs — any costs for food, recipes, rent, and utilities.

“By eliminating any necessities from your budget, you can easily save a few hundred dollars in the coming months,” said Sackoff. “Suspending your gym membership, canceling a service that you never use, and cleaning your house instead of a cleaning service — it all works.”

Reevaluate costs for some needs

While it’s best to reduce optional costs, you can consider the costs of some of the needs in your budget — although these “needs” may now look different than in the past.

“Taking into account the costs of basic necessities, such as transportation or child care, you can redistribute these funds to new“ needs ”, such as buying games for your children at home, or streaming online services for TV and movies, fitness or a meditation app, ”said Shelley-Ann Eveka, director of asset management at TIAA. “In addition to protecting your wallet, it is important to give priority to the mental health of you and your family in this new reality.”

But set a budget for situational expenses

“Although it’s easy to assume that quarantine will automatically cut your expenses, food delivery and online shopping can make us quickly build up credit card bills,” says Lauren Anastasio, CFO at 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 utility bills and insurance bills to make sure you get the best rates,” said Howard Dvorkin, chairman of Debt.com. “Save water, electricity, or gas in ways that are beneficial to 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

“Since we are entering a potential period of unemployment or falling incomes, we want to have the highest possible financial pillow,” Anastasio said. “If you haven’t yet been lowered, you haven’t been fired, or your income has not been cut in any other way, do everything possible to raise as much money as possible with the income that you still have.”

Create an emergency fund

“As the COVID-19 pandemic clearly shows, financial turmoil can hit suddenly,” said Greg Klingler, director of asset management for the Public Servants Association. - An emergency fund is an important part of your budget, and you may need to make a slightly smaller contribution to your savings (pension or debt payments) and / or desires (entertainment, clothing, etc.) in order to create and finance it. All Americans must maintain the fund at the level of necessary expenses for 3-6 months in cash. ”

Set priorities for debt repayment

“It may not be easy to pay debt in addition to your other accounts, but you need to try to deal with high interest debts such as credit card debt,” said Drake. “We spend most of our money on debt with high interest rates, so don't let them accumulate 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 face difficult circumstances that require a temporary reduction or termination of their pension savings,” said Eveka. “However, you should continue to invest as much as possible in your pension.” Perhaps this means allocating funds that you put aside for the coming months, such as children's sports or extra-curricular activities, and invest these expenses in 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.

“Although you and your financial advisor should periodically evaluate and carefully think over the balance of your portfolio, it is important to remind yourself that you do not play games: you invest in the long term and in your long-term financial security,” he said. - Patience is really a virtue when we are faced with the constant volatility of the stock market. Unfortunately, I saw how a large number of customers make emotional, reckless decisions during market turbulence, only to see quick unpleasant consequences that undermine their long-term financial security and put 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 not possible to pay them all. If you find that you cannot pay by credit card, call the company servicing your credit card and see if they can give you more time and refuse any interest, Eveko advises. “It 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 ready to offer you options for changing payments or even deferring some of your biggest expenses, including a 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 Financial Assistance Bill has 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 an application for unemployment benefits involves a waiting period of usually seven days, and applicants can expect to process their first check / deposit after an additional seven days,” 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 capital in the form of a house and open HELOC, you can access this promotion,” he said.

Withdraw your plan 401 (k)

If HELOC is not your option, you might consider borrowing from a 401 (k) retirement account.

“The new bill on financial assistance for coronavirus allows individuals under the age of 59,5 to distribute up to $ 100 out of their 000 (k) without paying a 401% penalty,” said Drake. “Be sure to talk to your financial professional about your options before withdrawing money from retirement accounts.”

Take 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. - Rates and interest rates can increase rapidly, so it’s important to understand what you are subscribing to. Before accepting any form of loan, consider other options. ”

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