Getting Financially Prepared for Tough Times

Many individuals and families may begin to experience additional financial stress due to the coronavirus pandemic and the impact to jobs and the economy. Here are some tips and resources to help guide you through these tough times.

Things That Are Always a Good Idea,  Especially Now

1. Track Your Expenses for 3 Months. Pay attention to where your money is going and eliminate unnecessary spending.
   
   • List your “Have-to-pay” expenses: Be very honest with yourself. A gym membership or Hulu subscription isn’t a have-to-pay for most people. This is for things like rent, mortgage, insurance, basic grocery expenses, car payments. It’s important to know the total you HAVE to be able to pay every month.
   • List the “Nice-to-haves”: Next, write down the monthly expenses that might be no fun to cut out, but aren’t essential and didn’t make it into the “have-to-pay” group. Then rank the list from easiest to hardest to give up. This will help you quickly cut expenses if times get tough. You already know what to do so you won’t have to make hard decisions in an already stressful time.
   • Fraud: Make sure that you recognize all your payments. Sometimes criminals make the transactions small so you won’t catch them. 
   • Recurring payments: Sometimes people have more than one account and have no idea, or have subscriptions they’ve forgotten about and never use. These are the rare things you can cut and not miss anything at all. Our CEO had two Netflix accounts and didn’t know until he did this. 
     
2. Interest on Debt: It’s best to pay off all your credit cards every month. But if you’re low on cash, you should prioritize. Start by making a list of all your debts, including the interest rate, minimum payments, and outstanding balance for each. Make the minimum payment for all of them every month and put any extra towards the debt with the highest interest rate until it’s paid off. This will save you money in the long run.
   
3. Emergency Fund: Having at least one month of expenses saved in a checking or savings account is important if you can do it. If not, make a plan to work in that direction.
   
4. Major Purchases: Plan and save in advance for large purchases (cars, houses, vacations, etc) and don’t take on more debt than you can comfortably afford.
   
5. Watch Out for Scams. Criminals step up their game – when people are most vulnerable. Don’t open unknown emails or click on unexpected links. Don’t answer calls from unknown callers. Donate only to known charities. Verify all requests for information independently (not through the link or phone number provided).
   
6. Durable Power of Attorney: Now is a good time to set up a durable financial and durable health care power of attorney. Each of these will allow someone you trust to take care of your financial affairs / medical decisions if you can’t. Setting one up even if you’re in good health is a good idea in case of an accident or other sudden illness.
   

Things That Are Specific to the Coronavirus Situation

1. Save money while social distancing. Many people spend their extra money on vacation, dining out, entertainment, and going out with friends. Since these options are temporarily very limited, take advantage of saving that money. Check out your freezer and pantry to find items you’ve been saving for a time like this. Buy grocery items that will keep or freeze. If you’re ordering food in, pay attention to the delivery fees. Don’t order things you don’t need out of boredom (we’ve all done it.) Take the extra money you’re saving and put it in your savings account (set up auto draft if possible!).
   
2. Consider Government Assistance: You may qualify for different parts of the economic stimulus package. Talk to a BrightDime coach for up to date information on each of these. 
   • Student Loans: The federal government has indicated that it will waive interest on federal student loans and allow deferment for up to 60 days. It’s not yet clear how this will be implemented and who will qualify but updates will be posted on studentaid.gov website. If you lose your job, contact your loan provider to discuss your options. If you have private student loans, contact your lender for questions and keep an eye on the interest rates and consider refinancing.
   • Cash payment: If passed, it appears that the federal government stimulus bill will give some people cash payments. The example cited was sending a family of four a direct deposit or check of about $3,000 (amount will be based on income from 2018 tax return). Once passed please follow up with us for details. 
   • Unemployment benefits: The federal government is allowing states to change their laws to provide unemployment insurance benefits related to the coronavirus (COVID-19). Each state’s rules may be different. Contact your state’s unemployment insurance program to learn about and apply for unemployment insurance.
   • Temporary Assistance for Needy Families. This program provides grant funds to states and territories to provide families with financial assistance and related support services. State-administered programs may include child care assistance, job preparation, and work assistance. 
   • Medicaid. Medicaid is a health coverage program operated by each individual state, under federal guidelines. Each state’s program is a little different depending on the needs and goals of that state. 
   • Supplemental Nutrition Assistance Program (SNAP). SNAP provides benefits to eligible low income individuals and families via an electronic benefits transfer card (EBT). This card works like a debit card to purchase eligible food in approved food stores. The Special Supplemental Nutrition Program for Women Infant Child (WIC) has also received additional funding and flexibility. 
   • Supplemental Security Income. Supplemental Security Income (SSI) is a Federal income supplement program funded by general tax revenues (not Social Security taxes). It’s designed to help aged, blind and disabled people who have little or no income to help provide cash to meet basic needs (food, clothing, shelter).
   • Earned Income Tax Credit. The Earned Income Tax Credit is a refundable tax credit for low- and moderate-income workers. The amount depends on income and number of children. People without kids may also qualify. This is claimed by filing your tax return. If you missed claiming it in previous years, the IRS encourages you to let them know so you can get that money back.
   • Housing Assistance. If you are unable to pay your rent or mortgage, contact your landlord or lender. They may be able to provide assistance. Also check out government resources such as HUD.gov for more options.
   • United Way. The United Way has a COVID-19 Community Economic Relief Fund to help with bills, rent and food. Visit 211.org for for information.  
     
3. Your 401(k) (or IRA or other investments). There’s a lot of advice out there right now. Some say to cash out, some say now is the time to “buy buy buy”. We are not investment advisors so we have no official opinion on market timing. We will just remind you that long term investing is just that, long term. The consensus of market professionals is that the best approach for most people is to stay the course, have a diversified portfolio and don’t make panic driven decisions.