Are you dealing with financial challenges as a result of COVID-19? Here are six possible action items:
1. If you’ve experienced a significant loss of income or a significant increase in expenses because of coronavirus, it may be worth seeing if a loan forbearance makes sense for you. A forbearance is a pause or reduction on loan payments for a limited period of time. The recent CARES Act has provided some assistance related to this – automatically suspending payments for federally-backed student loans, and allowing homeowners to request a forbearance of up to 180 days for federally-backed mortgages. Keep in mind, while the suspension of student loans is automatic, if you need a forbearance for your mortgage, you need to contact your lender and make a specific request. While the CARES Act did not cover forbearances for auto loans or personal loans, numerous financial institutions have been providing additional payment relief options as a result of COVID-19. Before you commit to a forbearance, there are a number of questions you should ask you lender: will there be penalties or fees involved? Will this be negatively reported to the credit bureaus? How will the payments be adjusted after the forbearance period? Will additional months/payments be added to the end of the loan, or will I have to pay all of the delayed payments at once at the end of the forbearance?
2. See what local resources can help you with any temporary needs. Checking with your local Department of Social Services can be a great start – in addition to seeing if you qualify for any of their programs, they’re also often very knowledgeable about the network of non-profits in your community. Virginia 2-1-1 is also a great free service for finding local resources.
3. Start tracking all of your expenses. This is often a crucial first step to identify your spending leaks, or unplanned non-necessity spending. At the end of the month, add up how much you spend on things like food, entertainment, clothing, and other flexible expenses and see if there are any spending leaks you can remove or reduce moving forward. For more about spending leaks, check out our post on the topic from a couple weeks ago!
4. Once you have a month’s worth of tracked expenses, now you can develop a budget. Figure out how much you would like to spend in each area per month, using your past spending to give you an idea of what may be realistic, and continue to track your expenses to see if you’re staying within your target budget amounts. Our My Money Lesson 5 has a great example of a simple budget.
5. See if you can cut back on how much you spend on utilities. This includes reducing your use of electricity, using fans more often while keeping the AC at a higher temperature than normal, and using more energy efficient light bulbs. For more on this, check out our post on this topic from a few weeks ago!
6. If you need help with your finances, there are quite a few free resources available to you. To name just a few – the Yellow Ribbon Network has provided a HIPAA compliant online platform for you to be connected with an Accredited Financial Counselor who will help you navigate through your financial challenges, for free! Also, Virginia Cooperative Extension has a free, self-paced mini personal finance course, with 11 audio-visual lessons, text, and optional assignments or action items.