Financial well-being March 23, 2020 By
The COVID-19 Pandemic created widespread health and financial implications around the globe. As a result, people lost jobs, were furloughed, laid-off, and working reduced hours. While it can be easy to panic in times like these, we want to share a strategy that will help you think clearer as you begin creating an emergency financial plan during any kind of challenging time.
What’s the financial plan? An Emergency Survival Budget! An Emergency Survival Budget is a very basic budget that “only” accounts for your Necessary living essentials. All “Wants & Discretionary Spending” are set aside, temporarily. The Emergency Budget will go into effect when your income completely stops or is considerably less than what you normally live on.
First, you will list out all monthly bills and expenses. This will include things like food, rent/mortgage, insurance, cell phone, utilities, debt payments (vehicle loans, recreational loans, personal loans, student loans, credit cards, medical bills, etc.), medical and prescription needs, and necessary miscellaneous items.
Now, it's time to make some serious choices. This is where you will cut all unnecessary expenses. Remember, this is an emergency survival budget. Here is where you will decide what goes and what stays.
Unsure where to begin making cuts? Here are a few suggestions: subscriptions (Netflix, Hulu, Spotify, iTunes, XM Satellite Radio, Audible, magazines, Amazon Prime, etc.), gym memberships, nail salons, golf memberships, restaurants, entertainment, and cable television. Workouts can be done at home, you can paint your own nails, etc. Anything that would be considered "extra" goes.
Take a deep breath! Count to three or thirty-three, if needed, then release. You can do this! This is only TEMPORARY. Don’t forget, you can exercise at home, there are free magazines and books using online libraries, free music online, and you don't need cable.
If you are contributing to an employee sponsored retirement plan, temporarily reduce your rate of contribution which will put more money back in your take-home pay. When this season changes, make plans to increase your retirement rate contributions.
Secondly, based on the expenses left (the ones you didn’t cut) look for ways to lower costs. I recently read an article “How to Create an Emergency Budget” by Simple Money Mom/financial blogger, Marissa Sanders, who inspired me to write this article. Here are some of the ideas she mentions in her article, plus some suggestions I’ve added.
Utilities: many companies may offer a "skip a payment" program in times of crisis. If not, see if there are hardship payment plans available. Be sure to ask if they can waive late payments.
Student loans: federal student loans have been temporarily dismissing accrued interest as a result of the pandemic. In addition, if you need the money for food and shelter, consider putting your student loans in forbearance. This will allow you to not make payments temporarily (generally for six months). Unfortunately, dismissing interest has not happened for private loans. If you have private loans, call your lender, and ask what they can do for you during this time.
Mortgage: mortgage rates also dropped as a result of the pandemic. Consider taking an opportunity to refinance your home. If the interest rate is lower, it can help lower your monthly payments. Keep in mind there are costs to consider such as closing and appraisal costs to name a few. Make sure you understand the costs before you make the decision to refinance. The First United Mortgage team is here to help you for your mortgage refinance needs, and to answer any mortgage questions you may have.
Credit cards: ask your card issuer for hardship assistance because it never hurts to ask. Another option to consider is transferring to a 0% interest card or ask for an increased limit. Companies are starting to offer forbearance of credit card payments now so call and ask if you are experiencing hardship.
Auto loans: if you can refinance to a lower interest rate, do it. Again, make sure it makes sense for you. Watch the fees. If the fees are more than you would save, it's just not worth it. Also, right now could be a good time to sell your vehicle and look for an older used vehicle that you can pay for in cash. Not having a car payment can be a real blessing during times of hardship.
Groceries: if the grocery store is in fully supply, consider applying coupons, bulk buying, or buy a store brand or generic brand. A few other options include:
- Check with all your hunting and fishing friends/family members to see if they have any poultry, beef, or wild game (pigs, deer, fish, etc.) they would be willing to share. It’s always a blessing to share with those in need. Also, if you have neighbors or family members who grow a garden and have canned vegetables, now could be a good time to see if they have anything they could spare.
- Try to use all the food you have stored in your pantry and freezer before buying more groceries. Think of it as spring cleaning for your pantry and refrigerator. Out with the old before bringing in the new.
- Check into federal and state programs for income, food, and other forms of assistance. If you have an emergency savings fund, now is the time to cautiously Check into federal and state programs for income, food, and other forms of assistance. If you have an emergency savings fund, now is the time to cautiously dip into the fund knowing that you will replace the funds when times improve.
Lastly, make a point to stay on budget. Overspending when there is no money to spend could be a sign you need extra help. Consider reaching out to a financial coach. At First United, free financial coaching is available to our employees, customers, and members in the communities we serve. Feel free to contact us at 800-924-4427, Monday-Friday from 8am-5pm CST.
Remember, our #1 priority is to help you Spend Life Wisely, and we are here to help put your mind and heart at ease.