Steps to Managing your Finances During Coronavirus Outbreak
With Coronavirus disrupting our daily lives, many people are worried about the effects on their budgets. Being told to sit on your hands and wait while uncertainty swirls around, you can just add to your stress levels. Taking some practical steps to manage your money can give you a better handle on your finances right now.
Our mission at Simple is to help people feel more confident with their money, and that seems more important now than ever. We hope that the budgeting tools built into your Simple Account—like Expenses and Safe-to Spend®—along with these tips can help you feel more in control while so many things in the world seem uncertain.
We've already seen shocks to the economy because of the coronavirus pandemic, and with increasing levels of uncertainty, understandably you may be worried about your finances. If you don't have an emergency fund (which experts say should be around three to six months' income), don't panic.
To help prepare for the financial uncertainty that many of us are facing, here are some money moves you can make now to protect your finances and build up a rainy day fund.
The rapid societal changes and uncertainty brought about by the COVID-19 pandemic have been a shock to everyone's systems. No one knows how to handle a situation like this, and that can lead some to act in ways that are more harmful than helpful.
The five activities listed below might seem like a good idea right now, but in the long run, they could actually have disastrous consequences for your health or your financial security. Avoid them at all costs.
You'll likely read a lot of pieces shortly about the things you shouldn't be doing with your money while the stock market is up and down (such as pulling it out of the market, breaking your budget to buy toilet paper, etc.). While those are important tips to keep in mind during a chaotic economic time, there actually are some other things that experts wish you would do with your money right now.
Call up every ounce of optimism you have. You'll need it to get through coronavirus isolation and months of working at home. That's if you're still working.
Paycheck or no, everyone needs to change up strategies for a new world. That means getting your finances in fighting fit shape and reviewing all money coming in and going out.
One silver lining: You are not alone, points out Liz Gendreau, 39, who blogs about family finance on her website, Chief Mom Officer. That means many companies are providing deferral programs for loans and mortgages for a few months. "You can't foreclose on 30% of the country," Gendreau said.
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The economic impact of the coronavirus outbreak may have you thinking about — and let's be real, losing sleep over — your finances now more than ever. With bills, investments and mortgage payments to consider, as well as looming fears about a recession, you may need an expert opinion to cut through the noise and calm your anxieties.
At a recent NerdWallet company wide discussion, four of our experts weighed in on what consumers can do during this time. Holden Lewis, Sara Rathner, Arielle O'Shea and Kimberly Palmer — NerdWallet writers and spokespeople across mortgages, credit cards and travel, investing, and personal finance, respectively — shared tips on the financial topics that are currently on everyone's minds.
We're sharing their responses to 10 of the biggest financial questions being asked right now. The answers have been lightly edited for clarity and length. People across the US are spending a lot more time at home amid lockdowns and shelter-in-place orders meant to help slow the spread of the Coronavirus. And this could be an excellent time to save some money. Preserving a few bucks now could be helpful as folks wait for the stimulus checks that the Treasury secretary says will start arriving within two weeks.
Federal, state, and local governments are working to respond to the growing public health threat of Coronavirus, or COVID-19. Communities continue to announce the temporary closure of businesses, schools and other public facilities or events. While these actions are necessary steps to help reduce exposures, it may bring financial uncertainty for many people who could experience a loss of income due to illness or workplace closures.
You may remember doing various emergency drills as a child for tornadoes, earthquakes, and fire. Many of us know how to prepare for seasonally extreme weather like blizzards by having extra food, water, and household supplies on hand.
But are you ready for life if you can't leave home for several weeks—like in Italy and parts of Asia? Many of us do not know how to adequately prepare for how novel Coronavirus is going to affect our daily habits. Entire nations are undergoing total lockdown to limit the viral spread. It may only be a matter of time before we need to take similar steps.
"Social distancing" and "flattening the curve" are impacting our daily habits and cancelling spring travel plans may just be the beginning. When it comes to your money, there are steps you can take today to make your life a little bit easier, especially if you need to stay home for an extended period.
Automate Your Finances
Automating your monthly banking activities is a good move under normal circumstances. It is an easy way to simplify your life. Reducing your public exposure can minimize your risk of getting sick too. Instead of running non-essential errands, you can do all of your monthly banking from home. Enrolling in automatic payments prevents the chance of missing bill dates and paying late fees. Some merchants and utilities even give you a small payment discount—saving you both money and time.
Lower your auto premium
When an auto insurance company calculates your premium, one of the factors it considers is how much you'll be driving the car. This is why the company may ask how long your commute is. The longer the commute, the higher the risk of the accident -- and thus the higher your premium. If you're working from home, there isn't a commute.
"When the car isn't being driven, there's hardly any risk," said Dan Karr, insurance industry watchdog and CEO and founder of ValChoice. "For insurance companies, the cost to insure goes down dramatically. There's no good reason for insurance companies to be collecting and keeping this money when the risk is reduced."
Contact your insurance company or visit its website to see if you can make the adjustment yourself. How much you'll save will depend on a variety of factors, and you'll have to switch back once you start going into the office again.
've you got a budget? That's great. But you need an emergency version, and now might be a perfect time to start using it.
According to Heather Albrecht, 36, a financial coach in Hartford, Vermont, it's best to make this plan before you need it. It's so much easier when you don't look for things to cut under duress. Write it down, so you can pull it out and see the plan you've made.
Think of what small luxuries to keep and what you can live without. The more you cut, the longer you can make your savings last.
"Be ruthless," Albrecht said. "You can always add in things if you feel you can't live without them."
Stay the course
You've probably read that now isn't the time to pull all of your money out of the market, so the opposite of that would be to keep investing. "Investors should continue to fund their IRAs and 401(k) plans," said Don Grant, Certified Financial Planner and investment adviser with Carey, Thomas, Hoover and Breault. "In fact, if they can up their contributions by 5%, it will pay off in the future."
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Rebalance your budget
Whether you're invested in the stock market or not, are continuing to get a paycheck throughout all of this or not, it's likely everyone will be impacted — at least in some small way — by what's happening right now.
As such, Lynn Ballou, Certified Financial Planner at EP Wealth Advisors, recommends working on your budget and slashing spending wherever you can. "When the markets recover — and they will, even though we don't know when — we want our families to be solvent and capable of dusting ourselves off and moving forward without being burdened by unwelcome debt," she said.
Part of rebalancing your budget should also include revisiting your emergency savings fund to ensure you have enough liquid cash. "The typical recommendation is to have enough cash on hand to cover three to six months of your necessary expenses," said Andy Panko, Certified Financial Planner and owner of Tenon Financial. "Now is a good time to update your analysis and assumptions as to whether three to six months is enough."
For example, if your job is the sole source of income in your house, and you work in an industry — like retail or travel — that has a heightened risk of layoffs, it may take you longer than three to six months to find a new job if you were to get laid off.
"With that in mind, do what you can now to cut expenses and save as much as you can in preparation," Panko said.
Do take a close look at all your outgoings and cut back on any non-critical or non-essential spending. Even if you are currently working and getting paid, put some money aside for that emergency fund. One idea is to put any money you're saving from limited travelling, eating out and other events.
If you already have your emergency fund, that's great, but now might be a good time to top it up and make it a 12-month emergency plan, especially as no one really knows how long the COVID-19 pandemic will last. If you find yourself out of a job or taking unpaid leave for an unknown period, then the more significant your slush fund, the better!
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Credit card and other debt
Several companies have put measures in place to help those struggling with debt because of the Coronavirus. If you have liability, such as credit cards and loans, call up your providers and explain to them you are struggling to make payments. The Financial Conduct Authority has also suspended its credit card persistent debt rules, which means providers cannot cancel your card until October, at the earliest. This will give some relief to those relying on credit for everyday living costs.
If you are looking to apply for a 0% balance credit card to transfer any existing debt, do it now. These deals may not be available for much longer. Corral credit cards. If you have credit-card balances, see if you qualify for a card with lower interest (or a no-interest introductory rate) and transfer your balances from higher-interest cards (though be aware there's usually a fee for transfers) Manage your mortgage. Have a mortgage? Refinancing at a lower rate can not only reduce your payments now but help you spend less on interest in the long term. (There are some costs to refinancing, so do your research)
Although the renovations that you were going to use the HELOC money for aren't likely to happen very shortly, if you were considering a HELOC or taking out a second mortgage, now might be the time to investigate your options. "The cost for borrowing money in a home equity line has decreased with the drop in interest rates," said Betts.
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Cancel subscriptions and memberships you can't use
Now's the time to figure out which of your monthly subscriptions are useless right now. Gym memberships, for instance, aren't usable for those sheltering in place and social distancing. Though many gyms are putting accounts on hold and aren't collecting fees, it doesn't hurt to get in contact with yours to make sure you don't get charged till you can head back in for a workout. One sports club is currently facing a lawsuit that alleges it continued to charge members even when its locations were closed.
If you aren't facing significant financial hardship due to the pandemic, however, and your gym or studio is independently run, consider maintaining your membership. Some fitness studios are also offering virtual classes for members. Your family may have more time to use digital video and music streaming apps during a self-quarantine. Reviewing your monthly spending is a prime opportunity to cancel unnecessary subscriptions.
This low-hanging fruit is an easy way to save money. As a quarantine is affecting many paychecks (not everyone can work from home), temporarily cutting expenses can be an act of necessity to pay your bills.
If you're on unpaid leave with your regular job until business returns to normal, you can search for a temporary gig with minimal public exposure. These extra funds can spare you from dipping into your emergency fund.
Keep Investing for Retirement
Pandemics and other unexpected events make it easy to only focus on the near-term and panic about the long-term. Auto-investing into your 401(k) or retirement plan with each paycheck encourages you to remember the long-term. Stock market volatility is gut-wrenching—even if you've been through a previous recession. Seeing massive drops and jumps tests, even the calmest investor. But if you stop investing out of fear, it can be difficult to start again. It can be even harder to stay invested during the next period of market volatility.
Use Digital Payment Apps
Now that public payphones are no longer commonplace, paper money is one of the dirtiest items you can touch. Even if you keep the recommended six feet of separation between strangers in public, you can pass germs along by paying with cash.
Writing a paper check can be more sanitary, but you're still making a physical payment. Not every business accepts check payments forcing you to pay with cash, plastic, or your phone.
You can always pay with a credit card or debit card instead of cash or check as well.
Digital wallet apps like Venmo, PayPal, Cash App, or Apple Pay permit a germ-free transaction. Some stores let you pay with digital wallets. Third-party apps and most bank mobile apps let you send money to friends for free.
Banking apps also have a nifty feature to remote deposit paper checks. If your employer doesn't offer direct deposit, download the bank app. It takes about a minute to take a picture of the front and back of your check using a smartphone. Whether they're handling loan payments or credit card balances, many companies are providing financial relief for those who need it right now. For example, Apple is letting Apple card owners skip April's payment, just like it did in March.
If you need to hold off on payments, contact your financial institution to see if it's offering anything that could let you defer. You can also check out our list of participating banks. On their respective websites, banks such as Wells Fargo, Chase and Citibank have laid out what options are available. But you should still get in touch to see what's open to you. It's important to remember that some of these arrangements could involve a catch. For instance, skipping a payment could add a bit of interest to your debt. So make sure to ask if any compromise could cost you some money down the line.
Spending like everything's normal
This situation is not normal, and we don't know when normalcy will return again. So right now, we need to focus on conserving cash to help us cover our essential expenses. This is especially important for those who have already lost their sources of income due to COVID-19, and those who are at risk of losing their profits.
Review your current budget and look for areas to cut back spending. You may want to take measures like cancelling certain subscription services you don't often use or turning your thermostat down to lower your energy costs. Do whatever you can to conserve your cash, and place that extra money into an emergency fund that you can rely upon in the weeks and months until things begin to return to normal.
Millions of Americans face tough times over the coming months, and there isn't much that most people can do about that until the pandemic starts to abate, and people can go back to work. But avoiding the five mistakes above can help keep your situation from getting any worse.
To reduce waste and grocery bills, centre your shopping list on affordable, shelf-stable foods that won't spoil in case you're stuck at home for a bit—like rice, pasta, and beans. Look for fresh foods that freeze well (like bread and shredded cheese) and long-lasting produce (like onions and carrots)
Consider picking up just a few things you'd need if you had a winter bug, like cold medicine and cough drops. If you take a prescription medication regularly, give your doctor a ring to ask if you need an extra supply—and be sure to call your insurance to make sure they'll cover it
Shop your own home
You might be surprised at how much you already have in your house to keep you comfortable while saying in. That lonely can of pumpkin in the back of the cabinet? Make curried pumpkin soup! The stack of half-finished crafts or unread books in the corner? Cheaper fun than renting movies online! Do an inventory of what's right under your nose before you run out to buy more
Invest In Yourself
When you have mobility and financial means, it's easy to solve many of life's problems by calling a service provider. Use this time to learn more about the various parts of your home and see if you can stretch those DIY muscles. You won't be able to do everything, but you'd be surprised how much you can do.
One example is learning how to make your own cleaning supplies, as some may be out of stock in your local grocery store. Did you know you can make your own homemade hand sanitizer? If you need more ideas, search the internet or DIY platforms like Pinterest. The amount of creative ideas is astonishing.
Not panicking during uncertain times can be tough. An event like novel coronavirus is placing lifestyle restrictions on our lifestyle that American society hasn't seen in living memory. Having a financial plan in place is a good start. While each situation has many similarities, no event is identical. You will need to adapt to the current conditions. Stay in touch with your friends and family during these times. Mutual support can help your family and community persevere.
We don't know the full effects of this global pandemic yet. Implementing these steps can help bring some degree of normalcy until it passes. Continue practising these recommendations, so you are ready for life's next surprise.