Covid-19: Understanding Your Financial Resources and Options 

Over the last month, our lives have been partially or completely disrupted. My city has been under a shelter-in-place order like so many other people for what seems like months. Covid-19 and Coronavirus is taking a toll on all of us physically and financially.

We must work with the circumstances that we are given and the resources on hand. Back when I was active in First Aid, a common saying is that the best first aid kit is the one that you have with you. While you may wish that you had prepared differently, it doesn’t matter at this point. The only thing that matters is the choices that we make now, and going forward.

One of the first rules in an emergency situation is to remain calm. To take a deep breath and steady yourself. Before making any financial moves, you should take a deep breath, and consider the short and long term consequences of any actions that you take. 

Know what your resources are:

It’s important to know what your resources are, so that you can make informed financial choices.

Cash Flow. This starts with understanding your cash flow which will help you determine what your income and expenses are. This will help you in the event that your income is reduced so that you can easily spot which expenses might be able to be reduced or eliminated. If you haven’t done so yet, create your cash flow statement (budget) with cash flow worksheet. Download the Cash Flow Statement worksheet from the Get Ready Financial Preparedness Club resources - free registration (here).

For each of your expenses, be sure to include the name of the company, account number, date due, average amount due and frequency. You’ll want to add a column for the average monthly payment for those bills that do not come monthly (for example if a bill is paid quarterly, divide by three so you will know your monthly expenses. This way you can start to understand how much is due per month.

Net Worth Statement. A net worth statement is an inventory of your assets (what you own) and liabilities (what you owe). Knowing your net worth will help you determine whether you are financially solvent and what your resources are. Download the Net Worth Statement worksheet from the Get Ready Financial Preparedness Club resources - free registration (here).

Be Proactive:

If you are facing financial challenges, it’s important to reach out to those you owe money to or send you bills as soon as possible that allows you to work with them rather than facing late payments and negative reports to credit services. There are a number of public and private resources available to you. Many entities are offering options to help people facing financial hardship during this time: If you haven’t received information from an entity yet, you should contact them and ask about special programs related to Covid-19. This is important as events are moving quickly and companies may not have had time to fully communicate options on late payments, waive late fees or spread out payments

When contacting a business, try using their website first to see if you can manage your account. Companies are also posting notices to their websites about how they are dealing with Covid-19 for their customers. Calling a company at this time might be challenging as most are experiencing even higher call volume and most likely with less resources - depending on where their call centers are located and how they are routing calls to work-at-home employees.

Know your options: 

Understand all of your options if you are facing financial challenges, as some will have a greater impact on your long term financial goals than others. If you are having cash flow issues, you can access cash from your assets, increase your income, reduce your expenses or borrow money. Before taking on debt or selling investments, do you have a way of accessing cash or generating extra income?

Access cash: 

  • Emergency fund. This counts as an emergency.
  • Liquid assets. If you have any liquid assets, consider selling them.
  • Investments (from non-retirement plans). Keep in mind your long term investment strategy prior to selling investments. If you’re selling investments you may be hit by tax gains plus the loss in value of your investment. If you have a financial planner work with them to determine if you can harvest losses to offset gains. See: Can You Turn Your Investment Loss into Tax Savings?
  • Retirement plans (401k’s and IRA’s). Best to avoid this if possible. The CARES Act allows you take out larger loans from a 401(k) with a slightly longer repayment schedule for Coronavirus costs. You can also take penalty free withdrawals from your 401(k) and IRA withdrawals.  for coronavirus costs. You will still need to pay income taxes on withdrawals. Always consider borrowing from your 401(k) before withdrawing. Here’s a good breakdown of the New Retirement Account Rules in Response to Coronavirus.
  • Unclaimed Property: This is a great time to look for unclaimed property.  Unclaimed Property Search Checklist.  This checklist will help you organize your search. The checklist covers the main resources for searching for unclaimed property (missing money) with links to each resource and include your results (and notes). Learn more here and Join the Get Ready Financial Preparedness club to access the checklist (free registration here).

Increase your income: 

Reduce your expenses:

  • Prioritize your expenses. Do this in a way that works for you. Consider three categories: 1) Essential/Mandatory - examples housing, food, insurance; 2) Necessary/Can be delayed - such as clothing and 3) Can be eliminated (services that you either no longer use or use infrequently such as a gym membership or other subscription).
  • Contact service providers to request a better pricing package. Many companies will do so, especially phone and cable companies. 
  • Determine if the terms of the loan can be changed. Lenders may be waiving certain fees along with allowing you to delay, adjust or skip some payments. However, doing so will not reduce your overall debt. Check to see if you can get a lower interest rate locked in.
  • Homeowners and renters. Some banks are offering forbearance on their mortgages, the opportunity to forgo payments on other debts temporarily. Learn more about relief programs including the CARE Act: Coronavirus Relief for Rent and Mortgage Payments. 
  • Student loans. If you have student loans, you may qualify for a delayed or reduced payment program. Just remember, even though you don’t need to make payments now, interest will continue to accrue, and you will have to make up these amounts eventually. Contact your student loan servicer to find out more about your options and if your loan qualifies. If you have a federal student loan, also ask your servicer about alternative repayment plans. Here are Student Loan Strategies for Those Affected by COVID-19. 

Borrow money: 

  • Home Equity Lines of Credit (HELOC). If you own a home and you have a HELOC, this may be a good source of cash. If you don’t have a HELOC, consider applying for one. 
  • Credit Cards: Beware of strangers bearing gifts. Credit cards have high interest rates and are the most expensive debt. So, try not to use your credit cards even for short term borrowing. Check if you have any cash rewards that you can redeem. Promotional financing options may be tempting, however, they may cost more over the long term if you are unable to pay off the balance before the introductory period is over. Be wary of balance transfer fees. 
  • Personal loans. These can have high interest rates. 
  • Non-traditional lenders like Pay Day loans or pawnshops. These loans carry very high interest rates. These should be avoided. 
  • Life insurance policy. You may be able to borrow from your life insurance policy if you have cash value life insurance. Be careful when you borrow from a life insurance policy. Learn about The Pitfalls of Policy Loans. 

Miscellaneous Financial Items: 

  • Health Insurance: Special enrollment periods. All state exchanges except for Idaho have either extended or otherwise opened special enrollment periods (this includes California, Colorado, Connecticut, District of Columbia, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, Vermont and Washington. Trump has announced that at this time, the federal health exchange will not have a special enrollment period. Here’s a round-up if you’re Uninsured And Worried About COVID-19? You May Be Able To Get Covered. 
  • Insurance Premiums. Insurance companies are making adjustments to premium payment grace periods. However, these adjustments are not the same for each company, so be sure to check with your insurance company.
  • Paid sick leave. If you work at a company, you may have sick leave coverage. However, coverage varies by company. Check your employee benefits manual or website. Some states do have mandatory sick leave. Here are Paid Sick Leave Laws By State.  The C.A.R.E.S. Act provides federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. However, it excludes at least half of private-sector workers, including those at the country’s largest employers. Here’s some details on coverage and Who Qualifies for Paid Leave Under the New Coronavirus Law.
  • Small business owners. The U.S. Small Business Administration has posted their Coronavirus (COVID-19): Small Business Guidance & Loan Resources. And, here’s How to increase cash flow during the coronavirus outbreak including low-cost and fast funding to keep your business up and running.
  • Taxes. The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020 (official IRS release). State tax returns and payments may or may not change. Each state must decide on its own if it will also delay its tax payment and filing deadline. Some states may match the federal delay. Others may not. Be sure to check with your local and state taxing authority to make sure you don’t miss any deadlines.
  • Unemployment Insurance. Unemployment Insurance is a joint state-federal program that provides cash benefits to eligible workers who are unemployed through no fault of their own. Each state administers a separate unemployment insurance program, but all states follow the same guidelines established by federal law. The CARES act increased the amount in benefits and now includes part-time workers, gig workers, self-employed workers, independent contractors and freelancer. Learn more at Careeronestop which is sponsored by U.S. Department of Labor.

Here are some other things to keep in mind:

  • Document any offered relief in writing (even if it’s just taking a screenshot from their website). If you cannot get it in writing, take as detailed notes as possible. Keep any communications with your file on that service or loan. 
  • Credit Scores. Be sure to monitor your credit reports to ensure that they are accurate and reflect any agreements that you make with lenders on payment assistance programs or forbearance. For example, if your lender agreed to let you skip one month’s payment, make sure they didn’t report it as delinquent or a missed payment. While a late payment to a utility or for rent won’t typically be reported to a credit bureau, it could show up if the bill is sent to a debt collector. Order your credit reports from the three major credit bureaus (Equifax, TransUnion & Experian). You can order them at no cost once each year at annualcreditreport.com. Be sure you enter the URL correctly as there are unofficial sites with similar names and/or sites that will charge you for your reports.Although most of the information is the same with each bureau, they do compile and track different information, so you should check your reports with all three. To help you review your credit report, download the credit report monitoring worksheet from the Get Ready Financial Preparedness Club resources - free registration (here).
  • Be on the alert for scams. Unfortunately scammers look for opportunities when we are most vulnerable. From the FTC: Coronavirus: Scammers follow the headlines and Coronavirus scams, Part 2.