The rapid spread of the latest coronavirus, COVID-19 has already impacted the financial lives of millions of American households and shows no signs of diminishing any time soon. Where does this leave you and your family in terms of your financial preparedness for the potential economic downturn? Have you reviewed your ability to manage on reduced work hours or to survive a layoff? What does that mean in terms of your current financial obligations like rent, mortgage, auto loan, credit cards and utilities? Successfully managing your available resources requires open lines of communication with everyone who has a stake in your financial health.
Here are three conversations you should have right now in order to minimize the financial impact of the COVID-19 crisis.
Open and frequent communication about finances can help make a crisis much easier to manage among family members. Even if you are the only one in your household, it is important to review your savings and fine tune your budget based on your current needs and future goals. Your personal savings will play an important role in an emergency but having an emergency spending plan will help you make that savings go farther. Work with everyone in your household to determine what is necessary and what expenses can be cut. Discuss which alternative budgets will work best and consider going off script to develop the best plan for your unique circumstances. For example, the popular 50/30/20 rule may work well during normal times, but the 30% recommended for entertainment and other discretionary expenses would not be appropriate during a time of belt-tightening.
The prospect of having work hours cut or eliminated can add a tremendous amount of stress to an already unsettling situation. Job stress resulting from these unknowns can have a detrimental impact on how you manage through difficult times. Make sure you understand what options are available for the continuation of employment and any income adjustments that may result from staffing changes. Knowing those details can help you anticipate when you will need to implement changes to your household budget. The discussion should also cover your benefits and their status if employment is terminated or hours are cut. When possible, make use of your Employee Assistance Plan (EAP) to receive counseling and access to other support services that can help you manage during times of economic disruption. Also keep in mind that there are some industries hiring to meet additional demand as more people adapt and shelter in place. If loss of income seems imminent, explore ways to generate a supplemental income stream with an employer or in the gig economy.
Your Lenders and Utilities
Being proactive can make a big difference when dealing with all sorts of financial obligations ahead of a crisis. There are already lenders and service providers offering special assistance for people with questions about managing bills during the coronavirus pandemic. It is likely that there will be an increasing level of guidance as the virus continues to impact more communities. When you are certain that your wages will be reduced or eliminated, contact each of your financial obligations to make them aware of the situation. Be honest and as detailed as possible about how the change will impact your ability to pay your account. Even if they offer special recommendations in response, always ask if there are other options for you to consider. The more informed you are about your choices, the more likely you will find the most appropriate solution. Sometimes these discussions can be overwhelming, and you are provided a lot of information to process. It is reasonable to ask for some time to consider your options and review the information, and you should also request to have details provided in writing by text or email.
There is no shame in reaching out for help in a time of need, so don’t hesitate to contact a nonprofit credit counseling agency for guidance when you feel confused or overwhelmed. Trusted agencies like those affiliated with the National Foundation for Credit Counseling (NFCC) have been helping people overcome financial challenges since 1951 and are here to help you no matter your circumstances.