A month ago, I felt like I was on top of the world.
My business was booming, I finally got in a groove of playing basketball at the gym with a group of guys, we were planning our son’s first birthday party, and life was pretty good.
And then it happened: the whole country was turned upside down — your life and mine.
My business is having its worst month in over a year, I’m not allowed to play basketball right now, and we had to cancel our son’s birthday party.
And I know a lot of people, maybe even you right now, have it a lot worse than I do.
This morning data was released indicating that 3.28 million Americans have filed for jobless benefits. Maybe you were one of them.
But regardless of where you’re at right now, in such uncertain times, you may not know how to approach your financial situation.
It’s impossible to know what things will look like in three or six months, but you can put yourself in a good position by taking certain financial steps and avoiding other common mistakes.
So today I’m going to share with you 9 money dos and 5 money don’ts.
No matter what your money looks like right now, the information I’m going to share with you today will help you stay healthy, safe, and financially comfortable over the next year and beyond.
9 Coronavirus Money Dos
OK, here are nine money dos in light of the current crisis.
1. Add to Your Emergency Fund
It’s always scary to start pulling money from your emergency fund, but coronavirus has already become the worst financial emergency in recent memory for millions of Americans.
If you’ve already been laid off or told not to work for the foreseeable future, you know how important it is to have cash to fall back on.
On the other hand, if you’re lucky enough to still be receiving a consistent income, it’s time to recognize the gravity of the situation.
If there’s any chance you could lose your job or have your hours cut, building your emergency fund should be your top priority.
Unless you’re highly confident in the size of your emergency fund, you should even consider diverting money that would usually go toward your retirement.
Don’t put anything into the market that you might need to use for necessities, medical bills, or other costs that could come up over the next several months.
Personal finance experts often recommend keeping emergency cash reserves of roughly three to six months’ worth of expenses.
Unfortunately, there’s no way to predict how long coronavirus will continue to affect the economy.
If you can afford to save up enough cash to last six months or more, you’ll be prepared for a much wider range of outcomes.
Of course, this also depends on how many other liquid assets you have to tap into if need be. If you have no other liquid assets than your emergency fund, it’s best to err on the side of caution.
Cutting down on expenses can help your emergency fund last longer, but you shouldn’t count on that when developing savings goals.
Review your actual expenses over the last six months and try to save at least enough to cover them again.
Additionally, many people forget about medical expenses when putting together an emergency fund.
These are more relevant than ever, so don’t forget to account for them in your target.
If you have a $5,000 deductible on your health insurance, for example, that number should be added to your six months’ worth of expenses.
2. Cancel Unnecessary Subscriptions
You might want to stay subscribed to services like Netflix and Hulu while self-quarantined, but you may not be using other subscriptions.
If you have a gym membership, for example, you should take steps to cancel or postpone that subscription as soon as possible.
It’s natural to forget these expenses during a crisis, but coronavirus won’t stop companies from taking your automatic monthly payment.
Saving money is more important than ever, so there’s no reason to keep spending money on things you don’t need.
With so many digital subscriptions available, it’s easy to lose track of your monthly payments.
Many people end up spending more than they realize, especially when payments are automatically deducted from their bank accounts.
To identify all your monthly subscriptions, use your bank, credit card provider, or credit union’s site or mobile app to review a recent statement. You should unsubscribe from anything you’re no longer using.
If you’ve recently changed banks or credit cards, keep in mind that the old provider could still be charging you as long as the account is still active.
Sadly, 24 Hour Fitness, New York Sports Clubs, and other businesses have made it difficult or impossible for customers to cancel their subscriptions.
24 Hour Fitness is extending memberships for the same amount of time that facilities are closed, but it is not allowing users to cancel memberships or freeze payments as far as I have been able to determine.
If your gym is forcing you to continue paying, send a certified letter stating why you want to cancel to both a local and corporate office.
You can also contact your bank or credit card provider to block future charges.
If you don’t take any action, they won’t hesitate to keep taking your money.
3. Deal With Your Mortgage
The U.S. has ordered a hold on mortgage payments for loans guaranteed by Fannie Mae and Freddie Mac. Legislators may continue to add protections in the coming weeks.
That said, you shouldn’t count on leniency until it happens.
If you’re struggling with your mortgage, it’s important to take action as soon as possible. Contact the lender directly to learn about their policies and any relief programs.
Alternatively, refinancing can help you save money on mortgages and other debts, especially if it will take you a long period of time to pay back your balances.
It’s even possible that if you refinance into a 20-year mortgage at a lower rate you could keep your monthly payment the same as your 30-year mortgage but have it paid off earlier. It doesn’t hurt to check your rates.
4. Look into Debt Consolidation
Like other term loans, debt consolidation loans pay a given sum in exchange for regular payments at a set interest rate.
For example, you might receive $5,000 at a rate of 15% over five years.
If you have a $5,000 credit card at 20% APR, you could save a substantial amount of interest by taking the loan.
People with average credit scores are generally charged between 15 and 20 percent for debt consolidation loans. Of course, you may get a lower rate if you have a strong credit history.
Along with the interest rate, it’s also important to think about the monthly payment and the term of the loan.
A lower interest rate sounds better, but it may lead to even more interest payments if you pay the debt off over a longer period of time.
Some loan providers even charge prepayment fees in order to discourage debtors from avoiding interest.
5. Research Balance Transfers
Balance transfer credit cards allow you to move a balance from one card to another for a small fee, typically around 3%.
Many balance transfer cards come with an introductory period during which you won’t be charged any interest.
You can use this time to pay down your debts without having to worry about gaining interest.
Transferring a balance may seem expensive, but 3% is a small price to pay for a year or more of interest-free payments.
Most credit cards charge around 15 to 25% APR, so a balance transfer can help you get back on your feet.
As with debt consolidation loans, people with higher credit scores generally qualify for better balance-transfer cards.
If you receive a balance-transfer credit card, start by dividing your total balance by the length of the introductory period in months.
For example, if you have to pay off $3,000 in 12 months, you’ll need to budget $250 per month in order to become debt-free before the interest kicks in.
6. Negotiate with Creditors
Some creditors are more likely to work with debtors than others, but it’s worth bringing up the possibility of a negotiation.
While creditors prefer on-time payments, they’d prefer to get your money late rather than not getting it at all.
Most people will be personally affected by coronavirus, so many creditors will understand your situation.
Furthermore, a growing number of cities have halted eviction proceedings, giving tenants more bargaining power when negotiating with landlords.
If you don’t think you’ll be able to pay rent, let your landlord know as soon as you can and try to work out a mutually beneficial solution.
7. Look for Relief Programs
Different creditors have different policies, but many have already announced special relief programs in response to coronavirus.
Take some time to research these opportunities as soon as possible, especially if you anticipate being short or late on any upcoming payments.
Many companies are already waiving fees, allowing late payments, and generally being more lenient with customers in financial difficulties.
Even car loan providers like Wells Fargo and Ally are running hotlines for issues related to coronavirus.
Similarly, most banks and credit card providers are currently offering some form of debt relief.
To get started, simply search for the name of your creditor along with “debt relief.”
You should also research public programs in addition to private ones.
For example, yesterday the Senate passed a stimulus package that should be approved by the House very soon, and in this package there is a provision automatically suspending all payments and interest on federal loans held by the U.S. Department of Education through September 30, 2020.
8. Research Unemployment Benefits
If you’ve lost your job due to coronavirus, you should start looking into unemployment benefits.
Unemployment rules vary by state, so you’ll need to look for the laws and regulations in your location.
Many states require people to have a minimum income or time spent working in order to receive unemployment.
Some legislatures have relaxed restrictions on unemployment in order to get people the help they need during the coronavirus crisis.
New York, for example, is no longer enforcing a seven-day wait time for new filers.
Unemployment offices are extremely busy, so don’t hesitate to call or look online as soon as possible.
9. Review Your Financial Plan
Whether or not your financial situation has changed significantly over the last few weeks, this is a great time to take a serious look at your money.
Most people will be forced to consume less while the economy slows down, so you’ll naturally grow accustomed to new spending and saving habits.
If you’re interested in budgeting, for example, start by reviewing your monthly expenses during the coronavirus pandemic.
Instead of cutting down from your spending in January or February, treat March or April as your baseline.
Resist the temptation to fall into your old habits when things go back to normal.
While we hope that everyone stays safe and healthy during this time, you might also want to revisit your will and consider life insurance plans if you haven’t already.
Even with a relatively straightforward inheritance plan, a legally binding will can ensure that your assets are distributed as you wish.
It’s worth thinking about life insurance if you don’t feel like you have enough money to cover surviving family members after your death.
For example, if you’re currently 40, a 20-year policy will insure your loved ones in case you die before you’ve had the chance to build up a substantial estate.
5 Coronavirus Money Don’ts
OK, so those were nine things you should do right now with your money, and here are five things you shouldn’t.
1. Don’t Panic Sell
The market has dropped substantially over the last few weeks, and it could continue to lose value in the near future.
If you expect stocks to go down, it’s natural to consider selling off now in order to avoid some of those losses.
That said, panic selling is never a good idea, especially when investing for a long-term goal like retirement.
If you won’t need the money until 2040, there’s no reason to worry about its value in 2020 or even 2021.
Ups and downs are unavoidable when investing over long periods of time.
Additionally, if you sell off now, there’s a good chance that you’ll miss out on significant gains when the market comes back up.
Missing the ten best months for index funds on a 30-year timeline can cut your return by more than half.
Keep as much money in the market as you can, and use as much as cash as possible before taking out your investments.
2. Don’t Try to Time the Market
Timing the market is another attractive idea that almost never works out in practice.
Study after study has shown that time in the market beats timing the market, but it’s easy to forget that when you start thinking you can get ahead.
Instead of trying to buy and sell at the perfect times, just invest on a regular schedule.
If you were already allocating a certain percentage of your paycheck to investments, don’t make any changes to those habits (unless you need to shore up your emergency fund).
In fact, you should try to avoid looking at investments entirely if you find yourself worrying about your portfolio.
Unless you’re planning to retire in the next few years, continuing as normal is almost certainly your best course of action.
3. Don’t “Stock Up” on Debt
There’s nothing wrong with getting some extra essentials at an uncertain time, but it’s important not to overestimate how much you need.
Supply lines will stay open for the duration of the crisis, so you shouldn’t have any trouble finding groceries, toiletries, and other necessities.
With that in mind, there’s no reason to start going (or going further) into debt just to stock up.
You probably won’t end up using everything you buy, and you’ll have to pay off those balances in a shaky economy.
This is not a good time to go into debt, so you should do everything you can to avoid it.
4. Don’t Spend Too Much on Delivery
Some people are approaching lockdowns and quarantines as an opportunity to try new recipes.
On the other hand, others find cooking tedious, and it’s easy to be tempted by the convenience of delivery.
Fortunately, food and food packaging aren’t associated with the spread of coronavirus.
That said, delivery and takeout can wreak havoc on your budget, and they’re two of the most common bad spending habits among younger people.
However often you cooked before coronavirus, try to start cooking at least one more meal per week.
There’s no way to predict the human and economic costs of coronavirus, but historical data tells us that the economy returns to normal after each downturn.
While it’s natural to feel anxious about your financial future, the same personal finance principles apply to both good times and bad.
If you can, try to save a little extra money and avoid using credit or retirement accounts to cover expenses.
Unemployment benefits are widely available, and Congress is on track to pass a stimulus package in the near future.
These tips will help you prepare for the worst, but keep in mind that every economic crisis eventually comes to an end.
5. Don’t Blow Your Stimulus Check
The federal government is insanely close to approving a $1,200 check for many Americans, $2,400 if you’re married, even more if you have kids, but please don’t blow this check.
Use it to pay for necessities, but otherwise unless you already have a massive emergency fund or are independently wealthy, put this money straight into your emergency fund.