The 2008 recession saw roughly 8.6 million jobs lost yet, already, the number of layoffs caused by the COVID-19 pandemic has far exceeded that — and is likely to keep rising the longer this crisis continues.
All over the country, millions of individuals and families are therefore forced to get by on significantly reduced incomes. And, naturally, many are wondering what they can do to shore up their finances and keep daily life going amidst the economic aftershock of this pandemic.
Here are six steps you can take right now to help get your budget in the best possible shape to ride out the economic downturn caused by the Coronavirus:
1. Streamline your spending
Write down your total monthly income alongside your current spending, splitting it into discretionary and non-discretionary expenses. Then subtract the non-discretionary living expenses — such as your mortgage, rental payments, groceries, etc. — from your total income to work out how much you need to cover your essential costs. If you have any money left over, try to put it in savings to build your emergency fund in case things get worse. Cutting back on discretionary items isn’t easy, but at least being in lockdown means you’re likely to spend less on little luxuries, like eating out, entertainment, personal grooming and shopping.
2. Be prepared
Even if you’re a full-time worker still receiving a paycheck, you should speak to your management team or HR department about whether things are on track to stay that way. If not, now’s the time to get up to speed with any unemployment benefits you could be eligible for should the time come. If you’ve already been laid off or furloughed, or fear you may be in future, research the possibility of government support. For example, the CARES Act is a $2 trillion stimulus package offering additional benefits for unemployed workers, including those who are self-employed, independent contractors or gig workers. Under the CARES Act, students can also suspend federal loan repayments, while unemployed workers with families may be able to claim an additional weekly supplement of $600 during the Coronavirus crisis. Read our handy guides on the CARES Act here.
3. Know your insurance options
You should review any insurance policies you have. For example, check your medical insurance to confirm that if you’re hospitalized, you or your family are covered. Know your co-pay, deductible and out-of-pocket limits, and if you have an FSA or HSA, check your balance now to offset any unexpected medical costs. Likewise, find out the details of any disability insurance available through your job, so if you become sick, you’ll have adequate income to hold you over in the short term. And, finally, take this moment to revisit your life insurance planning. Many insurance companies are now offering special programs to allow for qualified, healthy individuals to get life insurance without doing an in-person examination or lab test. Ideally, you should have eight to ten times your income in life insurance, particularly if someone else depends on your pay packet, too.
4. Plan your taxes
Under normal circumstances, your personal income taxes would be due April 15, but because of the Coronavirus crisis, the government has extended all filings to July 15. Business returns are typically required 1 month prior to personal returns. From a planning perspective, there are multiple tax implications for 2020 as a result, including additional credits, deductions and otherwise. Consult your tax advisor to determine how these changes may affect (and help) you. Unpleasant a topic as it is, you should also make sure your financial affairs are in order if you pass away. Smart estate planning now can help reduce any future tax burden faced by your loved ones.
5. If you can, invest
So long as you have the income and emergency reserves to cover your day-to-day expenses, retirement saving and other investing are still important in a downturn. Indeed, the current market falls due to the COVID-19 pandemic are presenting considerable investment opportunities, with many stocks available to buy low now. For the same reason, if you can, you should look to increase your existing retirement plan contributions. Most employer-sponsored schemes (i.e., 401(k), 403(b), 457(b)) will allow an annual contribution limit of $19,500 for the year 2020 and even more if you’re aged 50 or over.
6. Get creative with your cost saving
Life under lockdown is hard and there’s no getting away from the fact that there are testing times ahead, too, especially for families. So, whenever you can, try to find creative ways to save money and have fun at the same time. How about holding an at-home ‘pedicure party’ for the whole household, hosting a virtual dinner party or quiz night with friends over video call or if you have a pet, treating them to a homemade spa day in the yard?
GE-3059107 (05/2020) (Exp. 07/2020)