Reducing expenses and financial stress during a crisis
If you’re like many Americans right now, you are facing a lot of uncertainty and potential income issues. You're not alone and there are a lot of ways to find short-term financial relief. Take a look at a few ways to potentially cut back on your family’s budget quickly.
Mortgage or Debt Relief
If you're worried you can't pay your mortgage, car loan, student loan, or other debt, your first step should be to contact your lender. Depending on the type of loan, who it's serviced by, and your financial circumstances, you could be eligible for loan forbearance, loan deferment, a reinstatement or repayment plan, or a loan modification.
Debt relief might come from a lender individually or, for mortgages and student loans in particular, governmental programs at the federal, state, or local level. Ask your lender to go over all your options. Contact a reputable credit counseling or debt consolidation organization if you still need help.
If you’ve been affected by COVID-19, review our special financial assistance programs.
In general, it's not a good idea to stop saving. However, in times of financial hardship, you might want to temporarily halt deposits into retirement or college accounts. Just remember to resume within a few months, once you're back on your feet.
The exception to this is your emergency fund. If you don't have three to six months of savings for emergencies, continue to set aside cash for pressing needs. Unfortunately, appliances can still break, and roofs can still spring leaks during times of crisis.
Maximize your assets
If you own your home and have been diligently saving for retirement, you probably have assets that you can tap in times of crisis. Instead of taking out a high-interest short-term loan, home equity lines of credit can be a good source of short-term capital. You can also consider borrowing money from your IRA or 401(k), as long as you pay it back within a specified period of time. Before taking any of these routes, however, talk to an advisor so you understand the process, restrictions, and possible financial outcomes.
Rework your car payments
Your car could be another budget buster. On average, Americans spend over $2,000/year on gas and motor oil. It's likely that you're not driving as much as you used to, but your car payment will still come due. Call your car loan or lease provider and ask if you can lower your monthly payments or even suspend payment for a couple months. If you must, explore the possibility of selling your car, especially if you have another vehicle in the family.
Examine your monthly bills
Many people pay bills without much thought, especially when payments are automatically deducted from their bank account. Although keeping up with payments is the right thing to do, it also makes sense to take stock of your monthly outlay and see where you can adjust.
You might be surprised by how much you can save through negotiation. Don't expect to cut your bills drastically, but even a 10% savings over several accounts can add up. Certain bills lend themselves especially well to this, including credit card interest rates, cable, cell phone, medical, and insurance (car, homeowners, and rental). Many companies are offering assistance programs in today’s environment, check on their websites or call to check if they’re offering anything.
Evaluate your subscriptions as well, both for physical magazines and newspapers, as well as online services, cable, streaming video, and gym memberships. If you're not prepared to slash those expenditures outright, consider suspending them for a period of time. Call customer service and ask about seasonal holds.
Having a disruption in your income for any reason can be a source of fear and anxiety. The good news is you have the power to change habits and access resources to help you adjust your budget and get through this time of uncertainty. It might require a couple of days of phone calls and customer service chats, but it's worth it to protect your long-term financial well-being.