You’ve heard it before, but it’s worth repeating: We are living in unprecedented times. The global coronavirus pandemic has changed a lot about the way we live, from grocery shopping to socializing and everything in between.
For many Americans, though, it’s changed how they work and how they manage their finances. Some workers were furloughed, some had hours cut, and some were laid off.
If this applies to you, understand that you can — and will — recover from this. Things might seem scary right now, but with a little research and budgeting, you will get through this. And we can help.
Here are a few of the ways you can recover financially from COVID-19 and get back to the “new normal.”
Examine your current financial situation.
Ok, for this step you’re going to want to brew a cup of tea or put on your favorite movie for a little pick-me-up. Because, before you take any steps toward recovery, you’ll need to do a full audit of your current financial situation. This part might seem difficult, but it’s a crucial step to getting back on track.
Start by finding out what your total loss has been so far. Open up all your banking accounts, pull out your bills, and consider the following:
If your 401(k) or investment account took a hit, try to remain calm. Experts say the stock market is already starting to recover, and making impulse decisions can sometimes cost you more than weathering the storm will.
If you lost some or all of your income, look at your savings and find out where you can move some money to get through the next few weeks or months. If those accounts are drained, you can turn to a few sources for help.
Get help if you need it.
Since the pandemic started, various organizations — and the federal government — have created a few different forms of financial assistance.
Some states, for example, are suspending evictions for a few months to help those impacted by the virus.
Many banks and credit unions are offering small personal and business loans to help Americans stay on their feet until new employment options become available.
If you absolutely need to take money from your retirement account, the CARES Act allows you to take a loan from a 401(k), 403(b), 401(a), and other qualified government plans up to $100,000 or 100 percent of the vested account balance. This is just a loan, however, and you should expect to pay it back pretty quickly.
Many student loan lenders are also offering deferment options for those affected by the coronavirus.
If you plan on staying in your home for at least five more years, and you find an offer that lowers your interest rate more than 2 percent, you could also consider refinancing your mortgage.
Reach out and get as much help as you need to keep your head above water. Once you’re secure, it’s time to make a plan.
Create a new budget.
Budgets are incredibly helpful in getting back on track financially. And once you’ve got your basic necessities covered, you can create your “new normal” budget. This one should include all your basic expenses, such as rent or mortgage, car payments and groceries.
If you’re new to this and don’t know where to start, there are a number of budgeting apps to help you get going! Typically, you should start by recording every cent you spend, adding it all up and subtracting that from your monthly income after taxes.
Your goal now should be to cover your basic living necessities and put what you can into savings. Your new budget should also factor in one more thing: Paying back any loans you received because of COVID-19.
Repay your loans.
Much of the assistance we mentioned earlier is considered a gift — as in additional time to pay your mortgage or rent, a stimulus check, etc.
Some of that assistance, though, will need to be repaid at some point. As you build your budget, plan on paying back any loans you received, starting with whichever one has the highest interest rate. And don’t forget about your retirement loans. If you took money out of an IRA or 401(k), try to pay it back before the deadline to avoid fees and increased taxes.
Once you’ve got a plan for those loans, start thinking about the payments that will start to come back in the coming weeks. Student loan and rent were only temporarily suspended, so you’ll need to budget for those again, as well.
Start to build a financial cushion.
Finally, let’s talk about savings. They call it an emergency fund for a reason!
This year taught us all a valuable lesson about financial security. Experts say you should aim to have at least three to six months of your total living expenses saved away. As you begin to figure out your new normal, try to put money aside each month to hit this goal.
Tony Rasmussen, vice president of public relations and financial education at Mountain America Credit Union has said, “When it comes to making it through any kind of emergency, having a savings account is a surefire way to maintain peace of mind. Have at least three months of expenses tucked away in a savings account—preferably a separate account specifically for emergency funds—so that, when challenges come, you’re prepared to face them head-on, with less money-related stress.”
Hopefully, a global pandemic won’t happen again, but you want to be prepared for whatever else does.
If you need financial assistance, reach out to your preferred financial institution today. Ask to speak to a financial advisor about refinancing your home loan, opening a savings account, or anything else you might need assistance with. And remember, take care of yourself and stay well. We’ll get through this together.