The United States is officially in a recession, brought on by the coronavirus pandemic. Even as restrictions lift in states across the country, households will likely continue to feel the economic impacts for some time.
People are worried about their money, potentially now more than ever. Perhaps unsurprisingly, most employees (79%) say their current stress level about money has worsened since the pandemic began.
To help you navigate the uncertainty, we put together a free, comprehensive Guide to Coronavirus & Money. There’s no one-size-fits-all approach to managing money, especially during times like these, but the guide includes step-by-step recommendations and helpful resources you can use no matter your current financial situation.
Below are a few tips from the guide, you can click here to download the full version.
Step 1: Managing debt
Millions of people in the US have some form of debt – be it a credit card, a personal loan, or a mortgage. As households face income loss as a result of the coronavirus pandemic, even more people are taking on additional debt to make ends meet. In a recent survey of working Americans, we found 46% are using their credit cards, 26% are falling behind on bills, and 21% have pulled money out of retirement savings since the beginning of the pandemic.
If you’re worried about your debt, take a look at your credit card and loan interest rates as well as how much you owe in order to prioritize what to pay off. You also can look into whether you would benefit from transferring your balance to a 0% balance transfer credit card, or consolidating your debt with a low-cost personal loan.
If you think you’re at risk of missing a payment, defaulting on a bill, or struggling to pay your rent, it’s important to be proactive. Speak to your creditor, lender, landlord before you miss a payment to understand your options.
Step 2: Managing a crisis
Most of us have been impacted financially in one way or another – whether that’s in a reduction in work hours or pay, being put on temporary leave (“furlough”), layoffs, or job loss. If you find yourself in this position — you’re not alone: more than 3/4 of employees say their household income has decreased since the beginning of the pandemic.
If your household has experienced a drop in income already, or you want to prepare in case it happens in the future, here are some steps you can take:
- Review your budget: create a spending plan that only takes into account your necessary expenses so you can see how much you need to cover. Determine if your reduced income still allows you to cover all of your basic needs, or if you need to consider other options to bring in additional money.
- Cut costs where you can: make your money go further through creative cost-cutting. Food expenses can make up a large part of our budgets; meal planning and getting creative in the kitchen can help you save $100 or more a month.
- Tap into government relief: the government is responding to the economic impacts of the pandemic through various relief programs. Make sure you don’t miss out on any help that you’re eligible for so you can make informed financial decisions.
Step 3: Getting organized
Even if you’re not dealing with financial challenges right now, you will benefit from getting organized and reassessing your financial situation. Do you have the opportunity to negotiate down your bills? Could you be spending smarter and allocating more towards your future self? Take time to ask yourself questions like these to see where you can take steps to improve your financial health.
If you or your loved ones are spending less at the moment, this could be an opportunity to think about starting, or building up, an emergency fund. To get yourself started with building an emergency fund, you should set yourself a target amount of savings. Many financial experts recommend starting with $1,000 as a goal, to avoid taking on debt due to an emergency. To assess how much you specifically need to protect yourself, you need to work out how much you need to get by for a given period of time, including housing expenses, food, childcare, and more.
It’s important to note that building up emergency savings may not be feasible for you at the moment, and if that’s the case, that’s okay, too.
Step 4: Set a goal
When thinking about setting financial goals, many of them relate to big life events – buying a home, having a family, building retirement savings, or taking that trip of a lifetime. Unfortunately, many of those things feel out of reach or are on hold right now, but that won’t always be the case.
So right now, maybe you can set a goal that is more actionable and instant. In the current situation, addressing the first three steps could set you up to really work out what goals make sense for you. A few goals you may want to consider include:
- Manage debt: how can you pay off debt quicker?
- Build resilience: how can you deal with the current situation and protect yourself from future shocks?
- Get organized: what can you start doing differently to set you up for success?
Support with every step
There’s a lot of information out there right now, so to help you navigate each step, download the full Guide to Coronavirus & Money for useful links and resources.
Here are a few resources specific to coronavirus:
- CFPB: The Consumer Financial Protection Bureau has dedicated a new section of its website to coronavirus-specific financial resources. https://www.consumerfinance.gov/coronavirus/
- USA.gov: This site aggregates links to the most up-to-date information about the pandemic, the government response, and support you may be eligible for. https://usa.gov/coronavirus
- AP Fact Check: Fact-checking of popular news stories from the Associated Press, including a weekly roundup of the most popular but untrue stories / visuals. https://apnews.com/APFactCheck
- Federal Trade Commision: This section of the FTC’s website includes practical tips on how to avoid coronavirus-related scams and up-to-date coverage on common ones. https://www.ftc.gov/coronavirus/scams-consumer-advice