If you spend any time in the financial corner of the internet, you’ll sometimes find yourself among the finger-wagging set who like to exclaim “You should have had an emergency fund!” or “You should have saved more for retirement!” when someone asks for advice after a major financial hardship.
This kind of unhelpful comment mostly stems from the fact that financial “experts” are no more immune to smugness than any other types of “experts.”
However, as we face the unprecedented financial fallout of the coronavirus pandemic, I am starting to realize that some of this “told you so” behavior may, in fact, be the result of not knowing what the hell to recommend to people. I’ve never seen a financial clusterwhoops of this magnitude in my 41 years (although I was not paying particular attention prior to the early 1990s, to be fair), so much of the typical advice I would give for weathering a personal financial storm seems to be unusable in the time of
COVID-19.
But that doesn’t mean we need to fall back on the kind of “build a time machine and make different choices yesterday” advice that one often sees in these times. This may be unprecedented, but that doesn’t there’s nothing you can do.
Here are some suggestions for how to keep afloat after the economy has slammed on the brakes:
Remember That This Is Happening to Everyone
One of the most comforting pieces of wisdom I read after our schools closed came from my friend Megan, who has home schooled her three children for several years. She posted suggestions for suddenly handling homeschooling, and made the very reassuring point that our kids are not going to be “falling behind” because it’s not as though classes are moving on without them.
"Take a deep breath. Our kids are going to be okay. They will learn what they need to know, and they will not end up 'behind.'
There is absolutely no need, except childcare (which is a very big need) to have kid sitting at desks for 6 hours a day, 10 months a year, for 13 years. If we cut out 6 months of that, there will be NO negative repercussions for neurotypical kids who don't need consistent support. None. I promise. There is literally no research, there is literally no pedagogical expert out there who will say otherwise. There will, however, be repercussions for kids who need the milk crates, if the other kids continue on and leave them behind.
So. Make sure your kids read: that's important. Read to them, too. If you want to do some worksheets or some lessons, go wild. It won't hurt. But if you want to know the number one thing that will help their test scores, read this report and then send them outside."
Even if your school district is mandating virtual schooling, worksheet packets, and other educational activities, all teachers will start with major refreshers once school is back in session. Unlike when a kid has to skip months of school on her own because of illness or other life upheaval, this educational pause is happening to all of the world’s children. My friend’s comment helped me contextualize my responsibility to my kids during the pandemic. I don’t need to recreate school for them.
There is a similar important point to be made for our financial situations. While there are certainly differences in how the financial fallout will affect different industries and individuals, we are all in this weird financial time together.
The fact that this is well-nigh universal is part of what makes it difficult for experts to give advice. The normal suggestions for getting out of a financial hole won’t work when the whole economy is a dumpster fire. Right now, you can’t:
· Pick up a side hustle
· Sell something valuable
· Rent out a room or something else you own
· Borrow money from a friend or family member
I hate to admit it, but this is about the extent of the “find money in a hurry” bag of tricks. And they are not available in the time of social distancing and widespread economic problems.
However, even though being in this together does reduce your options for increasing your cash reserves, it’s not all bad news. With everyone in basically the same boat, there is an increase in both empathy and the ability to organize together.
I recognize that this kind of positivity sounds a little like admiring the excellent sourdough on your shit sandwich, but I do think it’s important to recognize the power we have by being in this situation together.
Here’s why: being financially healthy is about leveraging your assets. Usually you hear people talking about “leveraging assets” in terms of stocks or business assets (or in terms of sleeper agents undercover in enemy countries in James Bond films), but your assets are far more than just the specific capital-producing items you own or have access to.
Our ability to band together to make demands is one of the assets of this situation, and we should leverage it. In addition to labor organizing, calling your government representatives, and reaching out to your community as both helper, and help-seeker, can all be excellent ways to make the best of this universal situation.
Go Back to Basics
Though we find ourselves in a systemic problem, you still have individual financial obligations to deal with during this time. This is where you see a lot of the “coulda-shoulda-woulda” advice about how an emergency fund could have prevented your current heartburn. (As if a $1,000 emergency fund, or even a 3-6 month emergency fund, would be enough after the economy takes a header and cracks its skull).
So this is the time to identify the most basic bills that you have to pay to keep things going. According to Michelle Singletary of The Washington Post, that means paying the bills that would cause harm to you or your family if you stopped. Specifically, you need to prioritize:
· Mortgage/rent
· Car payment
· Utilities
· Child support
That means you can put your credit card debt, medical debt, student loan debt, and payments for loans from friends or family on the back burner. You and your family will not be harmed by holding off on these kinds of debts.
This is also a good time to consider turning off automatic payments, if you do not have money coming in. I’m a big proponent of automating your finances so you can make good money choices without thinking about it. However, automatic payments can bite you in the rear end if you’re not still getting a steady paycheck. If you have been laid off or furloughed, now may be the time to start handling your finances manually so you can have greater control over what you pay and when.
That said, even the prioritized bills may be difficult to meet if you’ve got nothing coming in and the relief check is weeks or months away. This is where we come back to the fact that we’re in this together. For some of these essential bills, you may be able to negotiate or adapt your payment:
1. Mortgage
If you live in New York, mortgage payments have been waived for 90 days. Even if you are not in New York, a number of banks are offering to defer payments on mortgages and other types of loans. But if your lender is not on that list, you still may be able to request a deferment for your mortgage payments. Your bank would prefer that you ask for help and work with them than have you default.
2. Rent
I have been hearing two types of stories about rent in the time of Coronavirus: landlords specifically asking their tenants if they need to reduce or defer their rent, and landlords twirling their mustaches while loudly proclaiming that neither global pandemic nor being tied to train tracks should keep their tenants from paying on time.
Thankfully, being in a financial catastrophe with the whole wide world makes it simpler to deal with the second kind of landlord. If you were hit with a personal financial emergency, it would be next to impossible to negotiate with an unsympathetic landlord. Right now, there are eviction bans in many states, in part for health reasons. Landlords will also have a difficult time finding new tenants, even if they were able to evict current tenants for non-payment. That means you can work with your landlord to try to hash something out, even if they have itchy eviction fingers.
You can also potentially band with other tenants to work together to negotiate as a bloc, which you would not be able to do if you were facing an individual financial crisis.
3. Car payment
Like your mortgage, you may be able to defer payments on your car note. Check to see if your bank is one of the lenders offering deferment, but even if it is not, it’s worthwhile calling to ask for relief.
4. Utilities
In addition to eviction bans, a number of states are also instituting holds on utility shutoffs. If your state is not on the list, then you will need to contact your utility providers to ask for options. As with lenders, your utility company would rather work with you than shut you off.
Cut Your Unnecessary Expenses
“Cut Your Expenses” may be part of the personal finance greatest hits collection, but it’s not just because it’s got a good beat and you can dance to it. There is almost always room to reduce in any budget.
To start, look at the expenses you are paying based on normal life. For instance, if you are currently stuck at home, you may be paying for auto insurance coverage that you’re no longer using. Call your insurer to see if you can reduce your coverage to the state minimums, rather than keeping the more comprehensive coverage. You can also see if your insurer offers a lower premium for reduced mileage on your car. If you’re not commuting, you don’t need to insure your car like you are.
As I mentioned last week, now is also a good time to go over your statements to find zombie charges. You may still be paying for subscriptions you no longer use, and that can be an easy way to cut your expenses without feeling a thing.
This is also an excellent time to use your negotiating skills to get better rates on the bills you have to pay. Call your internet/cable service provider and ask for a price break. If you know the lowest going rate, you’ll be in a better position to negotiate. Also, talk to the retention/cancellation department, as that department has the most authority to make deals in order to keep you. You can use similar tactics with your cell phone provider to try to get the best possible rate.
Other Ways to Bring Money In
While we’re all waiting for relief checks and the end of the pandemic, you may still need to find ways to get the cash flowing. There are a few options, although none of them are perfect:
1. Sell something
As I mentioned earlier, selling something valuable is much more difficult during a global pandemic than it is during a personal financial crisis. Fewer people have discretionary income to spend on your valuables, and it’s more difficult to sell while social distancing.
That said, there are still opportunities to sell to help generate some cash. For instance, crafting and other hobby items have been selling quite well during this pandemic, since people have more time on their hands. Perhaps you have a sewing machine, a loom, or a bread machine you could sell on eBay.
Similarly, gold sales often go up during times of economic uncertainty, which means selling any gold jewelry you have to a reputable dealer could be a way to generate some cash in a hurry. (Reputable being the operative word! Don’t sell to the folks who advertise on “news” channels.)
2. Sell your services online
This kind of advice is very hard to give generally, so it ends up sounding like the sort of useless suggestions you’ll get from “shoulda had an emergency fund!” finger waggers. However, every single person reading this knows how to do something that would be helpful to other people—and that people would be willing to pay for.
If you are stuck at home and unable to work at your primary job, offering your services online can be a helpful stopgap which can grow into a side hustle. My friend Michelle Jackson offers an excellent podcast episode on identifying your skill set and leveraging it into a lucrative online sales opportunity. Listening to her podcast can be a good, easy, free way to figure out if this is something you can do and want to do.
3. Access money in your 401(k) or IRA
I want to start off by saying this is a terrible idea and should be the absolute last resort. I feel so strongly about this that I would like to invite any readers who are thinking about taking a distribution from their 401(k) or IRA to contact me at emily@emilyguybirken.com before they do so. I’m more than happy to talk you through your options and help you find the best solution that will cost you the least.
That said, the CARES Act has eased the rules governing withdrawals from tax-advantaged retirement accounts during the Coronavirus pandemic. Specifically, you will not pay the usual 10% withdrawal penalty on distributions you take from your 401(k) or IRA if you are financially affected by the Coronavirus. You will still be on the hook for paying regular income tax on this early distribution, but you have three years to pay those taxes back.
Here’s why this is a bad idea: your retirement account has already taken a beating with the market downturn.
Taking a distribution from this reduced amount means you are locking in those losses. If the money is not in your retirement account, it can’t grow when the market rebounds. Meaning the temporary losses we felt with the market’s swan dive will become permanent with your early distribution. That’s why Uncle Sam usually charges you 10% of whatever you take out of your retirement account when you stick your hand in the jar before you retire: because taking money out of your retirement account is robbing you of future growth and possibly even financial stability in retirement.
If there is no other option, this is a strategy currently on the table. Again, if you are considering dipping into your 401(k) or IRA, please contact me at emily@emilyguybirken.com so we can chat about your options. I don’t want you stealing from your future self if you can avoid it.
This Sucks, and That’s Okay
It never occurred to me that we could face a major and sudden change to our way of life. Every major financial upset I have lived through came about more gradually, which meant we were all relatively comfortable with the system we had, for good or for ill. It seemed stable, even if it left lots of people in the cold.
Well, that system was far more fragile than we might have realized. We are all getting used to a different world than the one we thought we knew, and that means we’re going to have to adapt how we use our financial and personal resources. This is really painful and overwhelming and maddening and frightening.
I won’t say that we should all focus on those slices of sourdough, since recognizing what a shit sandwich we’ve got is part of accepting the world’s changes. And the road ahead is not going to be fun or easy.
But we can do what needs to be done, we can take care of each other, and we can remember that the system never mattered. It was just what we were used to.
Finally, I hope we can all agree to shout, “Oh, shut up!” to anyone who says you should have had an emergency fund.
Note from Emily:
Things are chaotic right now. People are losing jobs or learning to work from home, kids are schooling online, and money is tight for a lot of families.
I want to help. Book a free 15-minute call with me and we’ll create a plan for how you can weather this difficult time. I can guide you through getting your financials in order, creating a plan for your stimulus check or just help you prioritize your bills.
Simple, easy, no catch, no push to hire me for more. I just want to help you be as financially secure as possible through all of this. Find a time and book your call here.