During the COVID-19 pandemic, many families are having to reassess their personal finances and make adjustments to their spending. (Stock image)
In addition to health concerns related to the COVID-19 pandemic, many individuals and families are also having to deal with unexpected financial concerns.
“For many people, the situation has been just as difficult — possibly even more difficult — from a financial standpoint,” said Joyce Cavanagh, Texas A&M AgriLife Extension Service specialist in family economics and disaster assessment and recovery, College Station. “Many have had their hours cut or have been temporarily or permanently laid off, and this has added another layer of stress at an already hard time.”
Cavanagh said while the federal government is working out the details and logistics of national relief efforts, it is wise for people to do all they can to get a grip on their financial situation.
Establish a spending plan and prioritize
Cavanagh said having a spending plan or budget is essential for saving family resources and meeting identified financial goals.
“It’s important to have a grasp on fixed, variable, discretionary and occasional expenses so you can organize your cash flow, prioritize those expenses and determine which you may or may not be able to pay,” she said. “You also need to understand the possible consequences of not paying certain bills. However, things like going out to eat, playing golf and buying certain non-essential items can be avoided during tough financial times and are a good place to start cutting down. Of course, in many communities, these activities have been curtailed by shelter-in-place orders.”
She noted many utility companies, service providers, corporations and others are now making allowances for the current financial situation by offering payment extensions and other options for easing some of the financial stress.
Developing a spending plan and setting bill-paying priorities are always important, but even more so in tough financial times. (Stock image)
“If there’s one specific piece of advice I’d give people in financial straits or anticipating hard times financially, it would be to contact their creditors, explain their financial situation and see if the creditor is making allowances or offering some sort of temporary relief,” she said. “If not, perhaps they will allow you to skip a payment or make a smaller minimum payment than usual. One of the main things you want to do is lighten your overall debt load wherever possible, but you don’t want to just ignore your bills as that could be to your long-term financial detriment.”
She noted, however, if unable to pay some bills, then the bills having the highest priority are “survival” expenses, such as food, shelter, utilities and work-associated expenses.
“If it becomes absolutely necessary, you may have to skip some payments, which could damage your credit,” she said, “Then you’ll have to rebuild it once things get better. Unfortunately, you aren’t going to be the only one in that situation.”
She also noted the Internal Revenue Service has extended the income tax filing and payment deadline for 2019 taxes to July 15, which should provide some breathing room for those who expect to owe on their taxes.
Cavanagh said now might also be a good time to look into refinancing.
“Interest rates are very low right now, and you can save on your fixed mortgage payment and possibly other payments by refinancing,” she said. “However, it may take a while to get this done due to the current demand and strain on existing lender resources, so this should probably not be relied on in the short term.”
Look for additional ways to save
“Be sure you look at each expense and see where you can eliminate anything you don’t need, like extra movie channels on your cable or satellite service or home services you’re paying for that you may be able to do yourself – or never use,” Cavanagh said.
She said those with jobs should do their best to safeguard them and, if in doubt of their work future, dust off and update their resume and start to look for another job.
“While some U.S. industries have been hard hit by coronavirus pandemic, others are adding jobs and there may be opportunities there.”
Cavanagh said depending on the situation and risk comfort level, this may also be a good time to re-examine and re-evaluate insurance coverages for home and auto.
“You probably don’t want to take the risk of eliminating health insurance, but as far as home and auto insurance go, you might be able to reduce some coverage or go to a higher deductible for a lower rate.”
Who to trust – and not trust?
In tough financial times people often begin to doubt the stability of existing financial institutions such as banks and credit unions, said Nancy Granovsky, retired AgriLife Extension family economics specialist, College Station.
“This really isn’t the time to start putting money under your mattress or in a coffee can,” Granovsky said. “You can trust legitimate banking and financial institutions. Federal Deposit Insurance Corporation, or FDIC, insured accounts are safe, and since 1933, nobody has lost a penny in an FDIC-insured bank account.”
However, Granovsky said, there are scammers who will try to take advantage of people during the current crisis — both in-person and online — including those who claim to represent legitimate financial institutions, service companies or charitable organizations.
Granovsky also said to follow the same protections you would in normal times but be even more vigilant as scammers and defrauders view a crisis or disaster as a moneymaking opportunity.
“Precautions include not sharing personal information in-person, online or by telephone with someone you don’t know, not responding to or opening unsolicited links, texts or messages, or opening attached documents. Be suspicious of any special ‘promotions’ being offered, especially those requiring an immediate response,” she said. “And only deal with merchants, providers and charities you are familiar with or know to be reputable.”
Granovsky said this is a particularly bad time to make financial struggles even tougher by having someone scam you or steal your identity.
“At a time of elevated stress, it pays to be extra vigilant financially,” she said.
Extension resources for tough financial times
“There are some very useful resource in these financially uncertain times on the national eXtension website, which contains information and resources provided by a network of Cooperative Extension System experts from throughout the U.S.,” she said.
There are a variety of helpful articles under the heading Financial Security: Managing Money in Tough Times, along with practical lessons on how to manage finances at Financial Security for All Learning Lessons.
Some of the topics addressed in site materials include:
• Sizing up your financial situation.
• Controlling spending.
• Deciding which bills to pay first.
• Creating a budget and spending plan.
• Coping with financial stress.
• Making the most of existing resources.
• Earning extra money.
• Stretching food dollars.