By this point, the economic effects of the coronavirus aren’t news. If anything, there’s been so much coverage surrounding the topic that it’s hard to ascertain the right thing to do.
From job loss to quarantine retail therapy, you may feel like your financial life has been in a tailspin since March.
So we put together this post offering several simple steps to help you navigate the coronavirus outbreak and the havoc it may have wreaked on your personal finances.
1. Cut spending
When lockdown first went into effect, many of us thought we’d be spending dramatically less — after all, quarantine means we can’t blow our paychecks (or blow off steam) at the local bar or take a luxurious vacation.
And while certain types of spending are down, others have risen — including money spent on video streaming, food delivery, gaming, and alcohol, according to a New York Times analysis of data from Earnest Research.
If you find yourself with less disposable income these days, it’s important to find places to cut spending, perhaps starting with streaming services and online subscriptions. There’s more than enough content on any one of the most popular platforms to keep you entertained for the duration.
Email newsletters are another way to accidentally spend more than you mean to; retailers have been sending out ads in force, and it’s all too easy to give in to retail therapy. Unsubscribe from those marketing materials to keep those “deals” out of sight and out of mind, and maybe even consider taking on a “no-spend” challenge, in which you decide not to spend money on anything but your absolute necessities for a given period of time. Maybe start with a day and work up to a week or a month.
2. Automate everything
Dealing with multiple due dates makes it easy to overlook a bill — and late fees are no joke, not to mention the effect chronic lateness can have on your credit score. And building or maintaining your emergency fund can be difficult if you wait until you’ve paid the rest of your expenses to do it.
Automating as much as possible when it comes to finances could make your life easier while also making it more likely that you’ll achieve your money goals. For instance, if you’re attempting to fund a retirement account, you can set up automatic transfers to ensure you’re contributing on a regular basis, and you can set up autopay for credit card and utility bills.
3. Explore refinancing opportunities
Back in March, the Fed slashed interest rates to nearly zero — a move it hadn’t made since the 2008 financial crisis.
And although rate cuts generally mean bad things are happening in the economy at large, they can be good for consumers hoping to take out new loans or refinance existing ones.
Mortgage: Home equity can be one of the most reliable ways to maintain wealth during trying economic times, and refinancing your mortgage can help you save money on interest. However, it’s important to perform a full cost analysis to ensure you’ll still be saving money after closing costs, especially if the new loan will extend your overall term.
Student loan: The average student loan debt in America tops $30,000, and more than half of borrowers believe they’ll be repaying that debt for the rest of their lives. Refinancing your private student loans could make your monthly payments more affordable or save you money on interest over the long term — or both. If your student loans are federal, however, payments are temporarily paused (more on that below), and refinancing may mean giving up valuable repayment options, like income-driven repayment plans. Make sure to compare your savings from refinancing with the loss of those protections before deciding to refinance.
Personal loan: Unsecured personal loans tend to have higher interest rates than loans with collateral, so refinancing these may be a great way to save a significant amount of cash.
Auto loan: Cars are a depreciating asset, so it’s easy for an auto loan to turn upside down (i.e., for you to owe more on your car than it’s currently worth). Refinancing can help put those two values into closer alignment.
Credit card: Consolidating your credit card debt onto a new line of credit with a 0% interest rate could save you a lot of money if you can afford to pay it off before the promotional period is over. You might also consider taking out a personal loan to pay off hefty credit card bills, which tend to have the highest interest rates of all.
4. Manage unexpected extra cash
You may be saving money because of the temporary federal student loan forbearance, which has suspended monthly payments and waived interest accrual until September 30, 2020.
You may be planning to use these monies to take care of immediate needs. But if your finances are relatively stable, here are some ways to put your extra cash to use:
- Tackle debt. Making additional payments can help you dial down debt faster, especially if it has a high-interest rate, like many credit cards.
- Save for emergencies. Building a robust emergency fund is one of the best ways to ensure your financial stability over the long term. Experts recommend aiming for anywhere from three to six months’ worth of expenses.
- Consider investing. If you’re in a pretty good place financially, this could be a great time to invest for the future. Although the market has experienced some turbulence, many assets are more affordable and accessible — and the market has historically trended upward, even taking other major crises into account.
5. File for unemployment if you lost your job
Unemployment insurance, more commonly known simply as “unemployment,” can help you cover your bases if you’ve been let go from your job due to the COVID-19 outbreak. For eligible recipients, unemployment coverage has been raised by up to $600 per week through July 31, 2020 thanks to the CARES Act.
All of which is to say, it’s worth it to apply for unemployment if you haven’t already, though it can be difficult to get through to your local agencies because of overwhelming demand. If you’ve yet to make contact, document all your attempts, and stay persistent.
6. Negotiate with lenders
According to a recent survey, more than 80% of college students said they’re having trouble paying bills because of the coronavirus — and almost 40% report food insecurity, especially among racial minorities. Many have taken on more debt to make ends meet in the form of credit cards and even additional student loans, which could cause long-term financial fallout, especially when combined with existing debts.
Many borrowers don’t know they can negotiate with their lenders, many of whom have created alternative policies specifically to deal with coronavirus-related struggles. Pick up the phone, call your creditors and ask what they can offer you, from lower interest rates to lower minimum payments.
7. Consider canceling travel plans
Although some states are opening back up, many people still feel travel is a risky choice at best — and downright irresponsible at worst. If you have upcoming travel plans, you might want to reach out to your airline, hotel and other service providers; although you may not get a refund, you could get a voucher or change-fee waiver to use toward future travel.
Meanwhile, you can use the time to stay home, save what money you can, and plan for a brighter, less sequestered future. Hopefully, with these tips, you’ll still have plenty of cash in your wallet once you get there.