Since the COVID-19 crisis began, the United States has shuttered 30 million jobs, according to the Bureau of Labor. To put that in perspective, the U.S. economy lost a total of about 8.7 million jobs during the Great Recession of 2008. About four times as many people are unemployed right now than were during the entirety of the mortgage crisis.
For a lot of us, 2008 was about as bleak as it gets, economically speaking. But now, we’re dealing with a very different situation. This crisis came almost without warning—seemingly overnight. Our once-booming economy shut its doors and many industries are feeling the strain.
There are silver linings to the nature of this crisis. We didn’t erase demand for goods and services in our economy, we just stopped the supply temporarily. As things get back in gear and the economy opens again—there will be pent-up demand and workers will be needed to meet it.
If you are one of the millions out of work right now, this small glimmer of hope doesn’t do anything for your immediate financial needs. So what can you do now?
When you have a problem to solve, not matter what it is—creating a plan is a smart first step. Let’s start with focusing on the immediate future by trimming budgets and applying for benefits before moving to emergency savings.
Review (or create) a Monthly or Weekly Budget
It’s time to take a hard look at your monthly inflow and outflow. Make cuts wherever you can – Ask yourself: What is really necessary right now? Is it time to finally cut the cord with cable? Am I paying too much for car insurance or phone plan?
Starting with what you need can help you find out how much wiggle room you have in your budget. You can always add things back once the essentials are accounted for. This includes reevaluating the things you once thought as “essential” costs like gym memberships, music streaming services, pricey personal hygiene products and bottled water, just to name a few.
“Find out what your expenses are going to be for the next three-to-six months,” said Rick Hoskins, a financial advisor on behalf of Tulsa Federal Credit Union. “This is the typical timeframe that will take you to find a new job or career.”
Once you have a list of essential expenses, you can break this new, streamlined budget down week-by-week. After you’ve paid your big bills like mortgages, insurances, and other outstanding debts.
Some good news: many cost-of-living expenses have lowered or disappeared (at least temporarily). Dining out, vacations, and travel are postponed. You should be getting refunds on concert tickets or similar purchases. Fuel prices and expenses are probably down for most people.
Many financial institutions are working with people whose finances have been affected by the crisis, so be sure to reach out early and often to see what relief options may be available to you.
Save and Then Save Some More
Once you have a plan for the essentials, it’s a good idea to put anything left over directly into your savings. Having savings on hand during uncertain times puts you in a good position to react to anything that might happen.
It might sound counterproductive to think about saving when you are really in survival mode, but saving every extra penny right now just might help you make it through this financial crisis.
“Tax returns and stimulus money are being sent out right now,” Hoskins said. “Make sure the federal government has up-to-date information for you, including your direct deposit information to speed up your deposits.”Resist the urge to spend this money on anything that isn’t an absolute necessity, if your income has dried up during this pandemic. As tempting as it might be to spend it immediately (and some may need to in order to make it by), if you can save your stimulus check, do it. The same goes for tax refunds. Both are a chunk of money that can go a long way to floating you and your family while you are between jobs.
Instead, dump the money directly into a high-yield savings account. Add to this rainy-day fund as you can, and know that it is there if personal financial cuts and supplemental support aren’t enough.
If you haven’t had the opportunity to build up an emergency savings (or rainy day fund) that covers about 3-6 months of living expenses, your stimulus check may be a good way to get it started, Hoskins says.
Apply for Unemployment Benefits
The Department of Labor outlines three certain criteria for qualifying for unemployment benefits related to COVID-19. You can apply for unemployment benefits if:
- Your employer shuts down because of COVID-19;
- You are in quarantine because of exposure to COVID-19 and are not earning money because you cannot work;
- You quit your job because you are concerned about exposure or you must care for someone who is ill.
The Department of Labor’s webpage, Career One Stop, explains all the details about unemployment related to COVID-19. Go and apply for benefits. It may take repeated calls or inquiries to get through in your local area—be persistent.
“If you are without resources, tap into what state and federal benefits are available,” Hoskins said. “Food stamps and food credits might be available that you normally wouldn’t qualify to receive.”
Remember, even if you start receiving benefits, this is a short-term funding source. Continue to follow all of the other tips here and prepare for less income in the coming months.
Manage Extraneous Debt
Paying off any credit card or extraneous debt that you can is a good way to get your financial life straightened out. However, if you cannot adjust your budget to include paying off these debts because of job loss, you still have a few options for how best to handle this debt during this unprecedented time.
Call your lender or card issuer and communicate your situation to them. Many have set up programs to address the massive job loss our country is seeing, like paying only on the interest owed or other payment-reducing options. Following one of these new payment programs will allow you to maintain good standing with these lenders while also allowing you to survive until you can find employment. Use caution, however: These programs will not help decrease your debt and it will still likely need to be paid down when the agreement is over.
This debt management extends to your mortgage. If you are concerned about meeting your mortgage payment, communicate your concerns to your mortgage lender. You might qualify for certain programs like mortgage deferrals, which take extenuating circumstances into account and allow for mortgage payment forgiveness for a time period.
As a Last Resort, Tap into Retirement Accounts
Dipping into retirement accounts is usually discouraged, but there are extreme circumstances where it may be your only or best option.
“If it is absolutely necessary, use your retirement accounts to get you through this,” he said. “Preparing for your future is very important, but surviving the present is also very necessary.”
Hoskins says to talk with your retirement financial advisor. Many retirement accounts are waving the (typically 10 percent) penalty fee for early withdrawal because of the crisis.
But be sure to call on your retirement accounts as soon as possible, Hoskins warns, if you are considering utilizing this asset. He said retirement accounts often can not be accessed for 30-60 days from the initial request. The same is true with most all investments.
If you have them, it’s a good idea to leverage other investments to help with financial losses before your breaking into your retirement accounts. But Hoskins says if you are thinking of liquidating investments because they have tanked, it may be better to give them time to rebound. Call and talk through your concerns with your financial advisor before making any decisions.
“Right now, as far as the markets, hold on tight, stay focused on long-term goals and follow the advice of state and federal governments,” he said. “Stay focused on your financial goals, and call your advisor to see how you can get there in this new environment.”
No matter what your situation is, there are always steps you can take to help mitigate your situation or prepare for the future. The bottom line, Hoskins said, is to remember to take every part of this financial crisis one day at a time. Like many areas of life, keep making the next right choice and eventually we will push through this crisis.
“This is a moment in time when we want to keep our long-term goals in mind. We don’t want to make long-term decisions based off of short-term situations. Over the long term, the market will take care of itself, and in the long term it always makes money. Give it time. Give all of this time.”
Stay focused on solving problems that are in your control, and one day we’ll all be on the other side of all of this.
This article is for educational purposes only. Tulsa FCU makes no representations as to the accuracy, completeness, or specific suitability of any information presented. Information provided should not be relied on or interpreted as legal, tax or financial advice. Nor does the information directly relate to our products and/or services terms and conditions.