Pandemic

Financial Survival Tips For Middle America During the COVID-19 Pandemic

We’re in the midst of a market-stalling pandemic, and while the long term effects remain uncertain, we can see firsthand the short term issues and anxiety caused by COVID-19.

Between coronavirus-related layoffs and market instability, a lot of Americans have seen their income drop drastically. Here’s a short guide to walk you through some of the steps that can keep you afloat financially during these troubled times. 

1. Reshuffle your expenses

Now’s the time to cut back on unnecessary spending. The first bills to go should be the nonessentials. If you’re paying for six different streaming services, reevaluate which ones you can live without. Look over your subscriptions and all other entertainment expenses.

Choosing which bills are vital

If things get truly desperate, you may find that you simply can’t afford all the bills due this month. Prioritize the services you need for work and your basic needs. When it comes to the credit card bills, call the company and inquire about extensions. We’re in unprecedented pandemic waters here, and a lot of credit card companies are willing to work with their customers.

Wait to pay taxes

If you owe taxes on your income for last year, you have until July 15 to pay. File your taxes anytime, but hold off on paying anything to the IRS until things have stabilized a bit. There will be no interest or penalties for those who wait until July 15 to pay. 

A $2 trillion dollar stimulus bill became law on Friday. The largest bill of this type to pass in modern U.S. history, this new stimulus package means a lot of Americans in lower and mid-level income brackets have a check on the way. These relief checks are set to be included with tax returns. Even if you haven’t filed yet, the IRS will pull your 2018 data to determine how much money you qualify for.  

2. Leave your investments alone

If you’re like the rest of us, then you’ve been nervously watching your 401(k) and Roth investments take some serious hits as the market fluctuates. It can seem like the Wild West out there for your investments when the economy is soaring towards a market crash one day and skyrocketing back up the next. 

Market volatility is normal

Your investments have been surviving the normal ups and downs of the stock market for years. A dip in the market may even present a good buying opportunity for those who practice dollar-cost averaging in their 401(k)’s. In this investing strategy, you put the same amount of money into stocks/mutual funds on a routine basis. Naturally, a down market means you’ll be getting more shares for the same amount. 

You can check out this article from our WellthLetter to see dollar cost averaging in action and how it compares to traditional market-timing strategies. 

Many people are quick to panic over their investments in times of economic uncertainty, but remember that your 401(k) is being actively managed and that the market will recover. It can take a little time, from a few months to several years depending on the situation, but things will eventually swing back in your favor. 

The worst thing you can do is panic and start selling (and you shouldn’t rush to buy right now, either). Unless you desperately need to dip into your investments to pay off emergency bills, let them weather these market changes untouched. The studies are in, and time in the market really does outweigh the timing of sales and purchases. 

3. File for unemployment (even if you weren’t laid off)

If your income has been significantly reduced or even completely cut off, you may qualify for unemployment. Rules vary by state, but in many places, unemployment insurance will still cover employees who have been quarantined or otherwise forced to take leave without pay, but who haven’t been officially laid off. 

Also, take a moment to brush up on the new paid leave regulations in the Families First Coronavirus Response Act.

4. Build a security cushion

Having some extra money set aside for emergencies is always a good idea, but right now it’s a necessity. If you don’t have a dedicated emergency fund, set one up. Even a few hundred dollars can make the difference between scraping by and needing to borrow money. 

Most of us think of emergency funds like savings accounts that we put a little money in each month and watch gradually grow. If you don’t already have an emergency fund, you might worry that you’re out of luck, but saving money during an emergency isn’t impossible! It just requires diverting all possible expenses towards your emergency fund. 

5. How to (responsibly) tap into your savings

The money you have stashed away in savings could be your lifeline right now, but make sure you’re withdrawing money carefully. Now’s a good time to do a refresh of your bank’s specific rules. For example, you may find that your savings account charges you a fee after a certain number of withdrawals. In that instance, it may be wiser to take out more than you think you’ll need to avoid multiple withdrawals. 

6. Don’t overstock

You should minimize the number of trips you take to the store by making sure you have enough food and general supplies to last for a week or two. However, you want to avoid “hoarding” any food, cleaning supplies or paper products. Doing so is largely unnecessary and will only put an extra strain on your finances in the short term. 

7. Focus on the long term

A lot is up in the air right now, but most experts predict the market will begin to stabilize over the next few months. So while caring for your immediate needs and expenses takes precedent, don’t lose sight of your long term goals. 

8. Stay calm

Above all else, stay calm! Find what you can do to survive the uncertainty of the world right now. This isn’t the first major shakeup the economy has seen, and it won’t be the last. 

In this age of instant information, updates about the novel coronavirus are hitting our phones multiple times a day. It is easy to become caught up in the worry and speculation of others. Avoid social media and check in regularly with trusted sources like the CDC or CNN’s Market page to stay aware of new updates.

The information in this article should not be interpreted as investment advice. It is intended to serve a greater purpose and can be used to guide you through difficult financial times, now and in the future. Albeit down markets are normal, frozen economies are not. We believe there will be a time where the economy will again flourish. In the meantime, we hope the information in this article has a positive influence on your life.


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