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Living on a Lower Income: 10 Tips to Stay Financially Afloat Through the Covid-19 Crisis

Posted by admin on 06/01/2020 12:00 am  

All it took was a matter of weeks for the Covid-19 pandemic to turn what had been a prolonged period of low unemployment into a muddle of lay-offs, pay cuts, furloughs, lost income and overall unemployment levels not seen since the Great Depression almost a century ago.

Amid the considerable damage the global health crisis has inflicted on individuals, households, businesses, communities and entire economies, the loss of jobs, income and workplace benefits has been especially painful, leaving millions of Americans on tenuous financial footing as they scramble to pay their bills, cover their expenses, stay on track with their goals and generally keep themselves financially afloat.

“Income decline is tremendously hard in every respect,” says FPA member Katrina S. Soelter, a CERTIFIED FINANCIAL PLANNER™ professional with KCS Wealth Advisory in Los Angeles. “It impacts you emotionally, mentally, culturally, and obviously financially. There is no easy answer that will make the hardship magically disappear.”

There are, however, steps you can take today to blunt the impact of lost income, make the most of the financial resources you have on hand, and in the process maybe even put yourself on stronger financial footing for the post-pandemic era, whenever that arrives. Here, CERTIFIED FINANCIAL PLANNER™ professional members of the FPA offer suggestions to help you stay financially afloat during the coronavirus outbreak and its aftermath:

  1. Take care of your mental health. Amid so much uncertainty about health, finances and the state of the world, it’s natural for people to experience a heightened level of stress, anxiety and fear. First, remind yourself that you’re not in this alone. Lots of people around you are experiencing the same thing. Seek counseling, use telehealth resources, and give yourself grace and understanding, Soelter suggests. Try keeping a gratitude journal, and make time for physical activity that’s free and gets your endorphins going. Connect regularly with people you care about, and don’t be afraid to share how you’re feeling. Chances are, they’re feeling the same way!

 

  1. Take a hard look at your spending. Write down everything you spend your money on, then cut where you can, starting with things like gym memberships, online entertainment services and the like. “You will feel so much better,” says Soelter, “if you are able to live within your new income and it will relieve stress and worry to have a plan to do so.”

 

  1. If you are struggling to cover your expenses and have an emergency cash reserve, now could be the time to tap it. Emergency funds are made for moments like these. Most financial professionals recommend maintaining a readily accessible cash reserve with enough to cover three to six months of household expenses.

 

  1. Take advantage of external resources and support. Straining to pay expenses like rent, mortgage and the like? Many lenders and landlords are now offering (voluntarily or because they’re required to) flexible payment programs. Be sure you’re clear on the terms of that relief, such if you may be required to make a large lump-sum rent payment to make up for skipped payments. People who have lost their job during the pandemic should file for unemployment benefits immediately; in many states, those benefits have been increased for the short term, according to Soelter.

 

It’s also worth searching Google for other forms of relief that may be available locally. “Your Google search should be specific to find what is helpful for your particular situation,” notes Soelter. “For example, if you have enough in your budget for your fixed expenses but are struggling to buy groceries, then type into Google, ‘Grocery help [location]’ or ‘Food assistance [location].’”

Bottom line: Help is available, you just have to find it. “If you have an issue with paying a bill or an expense, there’s probably a program out there to help you find relief.”

  1. Prioritize necessary expenses and hack your habits. “If you struggle to maintain your budget,” says Soelter, “do whatever you need to do to hold yourself accountable: freeze your credit cards in a block of ice, go to the bank to take out only the cash you need for the spending you are about to do, and only before that trip, use reverse budgeting and only transfer the amount you are about to spend from your savings to your checking right before you go to the grocery store, etc. Be militant. You'll feel better.”

 

  1. Make hard choices if necessary. Moments like these can thrust difficult either-or choices upon you. If it comes down to choosing between contributing to a retirement account and paying for groceries, cover your more pressing near-term needs first.

 

  1. Lean on your community. We are all in this together. With a crisis like this comes the opportunity to accept the kindness and generosity of others, and to be generous and kind with others in return.

 

  1. Consider other liquidity options. If you own a home, a home equity line of credit can be a viable source of cash to cover expenses. Essentially, a HELOC is a line of credit available through banks and other lenders that enables you to tap the value of your home.

 

  1. Be aware of your last-resort liquidity options, and treat them as such. The CARES (Coronavirus Aid, Relief, and Economic Security) Act allows people to access funds in their workplace retirement accounts [such as a 401(k)) and/or IRA] via loans or withdrawals. If you, your spouse, or a dependent is diagnosed with Covid-19, or if you have incurred negative financial consequences as a result of the pandemic, you may be eligible to take a retirement account distribution of up to $100,000 without an early withdrawal penalty. Income taxes still will apply to withdrawals from tax-deferred accounts like traditional IRAs, but people can opt to spread those taxes over three tax years. They also can treat the withdrawal as a loan (if the retirement plan in which they are enrolled permits loans); if they repay the loan within three years, they may be eligible for a rebate of any taxes they paid on the withdrawal. This loosening of retirement account rules lasts until September 23, 2020.

 

Soelter suggests people use this option only as a last resort, to cover necessary expenses when there are no other viable alternatives. The same goes for credit cards. If your liquidity is such that you have no other choice to cover necessary expenses, a credit card can serve as a short-term stopgap. If you find yourself in such a predicament, look for a credit card with a low-interest offer, like zero-percent interest for 15 months, for example.

  1. Get creative. If you’re out of work and have in-demand skills or talents, now’s a good time to try to monetize those to generate income. If you’re a master baker, start selling baked goods locally. Got a green thumb? Market your gardening skills. Have items you don’t necessarily need or want that you think would have value in a secondhand marketplace — an unused bicycle, electronics, furniture, etc.? Try selling them on eBay, Craig’s List and similar sites.

 

June 2020 — This column is provided by the Financial Planning Association® (FPA®) and FPA of Nebraska, the principal membership organization for Certified Financial PlannerTM professionals.

FPA seeks to elevate a profession that transforms lives through the power of financial planning. Through a collaborative effort to provide members with tools and resources for professional education, business support, advocacy and community, FPA advances financial planning practitioners through every phase of their careers, from novice to master to leader of the profession. Please credit FPA of Nebraska if you use this column in whole or in part. The Financial Planning Association is the owner of trademark, service mark and collective membership mark rights in: FPA, FPA/Logo and FINANCIAL PLANNING ASSOCIATION.  The marks may not be used without written permission from the Financial Planning Association.


Finding Relief from Financial Anxiety During the Covid-19 Crisis: Suggestions to Alleviate Angst and Maintain Perspective About Money

Posted by admin on 06/01/2020 12:00 am  

If you’re stressed about your financial situation, if you’re worried about covering your expenses from week to week and month to month, if you’re fretting about your employment status or about finding work after losing your job, if you’re concerned about your health and anxious about what the future holds, you are not alone.

Pervasive feelings of concern, worry, stress and anxiety have accompanied the coronavirus outbreak. And for many people the source of these feelings goes well beyond financial issues, observes CERTIFIED FINANCIAL PLANNER™ (CFP®) professional and Financial Planning Association® (FPA®) member Susan Mitcheltree, partner at Berman McAleer, a wealth management firm in Timonium, Md.

“We thought we had certainty about so many things in our lives, and now that veil of certainty has been lifted,” she explains. “Now I think people realize how drastically life can change in a very short period of time. That can be anxiety-producing.”

Anxiety about finances, health and the like can indeed produce a sense of inertia, an overwhelming feeling of powerlessness that can lead to inaction, Mitcheltree adds. “Having uncertainty on so many levels can make it hard for a person to move forward.” That inaction can cause a person to lose a grip on their day-to-day financial responsibilities and lose sight of their big-picture financial goals. “You actually fall behind by staying still.”

At least on the household finances front, taking aim at the potential sources of financial anxiety with modest but meaningful steps is key to relieving the pressure and maintaining a firm handle on your finances. Among the steps that Mitcheltree and other CERTIFIED FINANCIAL PLANNER™ professional members of FPA suggest taking in pursuit of that relief:

  • Start with some deep breathing. Spend a few minutes focused just on breathing from the base of your belly, up, then slowly out. Oxygen “helps to get a clear head and think coherently,” she says. A brisk walk, jog, run, meditation, yoga or some other form of exercise also helps to relieve stress, reframe the mindset and feel better about things.

 

  • Stay grounded by reminding yourself of long-term goals. “You can't sail across the ocean in a straight line and you can't get to retirement and other long-term goals without some course adjustments,” says FPA member Mitchell Kraus, CFP® at Capital Intelligence Associates in Santa Monica, Calif. “Keep in focus that there will be some bumps in the road and review what you'll need to do to get your goals.

 

  • Prioritize what is most important to you financially in the short term. Is it debt reduction? Reducing household spending. Finding a job? Applying for some form of government relief? “It’s probably not going to be possible to accomplish everything at the same time, so focus your efforts,” says Mitcheltree. “You cannot effectively fight two battles at once. Pick one battle and give it your all.”

  • Create a written plan or strategy for meeting goals. “Big goals happen one step at a time, so put in the effort here to formulate a plan to accomplish your goal. If you want to pay down debt, what’s your plan? Which loan is first? Do you need to refinance or restructure any debt? What changes may you need to make to give you the excess funds to pay down the debt? When will it be paid off at this rate? Begin with the end in mind.”


People who already have a financial plan created by a financial professional are ahead of the game. If you don’t have such a plan, consider enlisting a financial professional to develop one on your behalf. CERTIFIED FINANCIAL PLANNER™ professionals are deemed essential during the health crisis and most remain open to serve the public via phone, video conference, email, etc. To find one in your area, check out the FPA’s searchable national database at www.PlannerSearch.org.

  • Visualize what success will feel like. “The last and most important step is to see yourself – right now – achieving that goal,” Mitcheltree says. “Mentally go into the future and experience the other side of accomplishing this goal. The more real you make that feeling on the other side of the goal, the higher your likelihood of success. Don’t just say you want to get out of debt, go there in your head. How does that feel? Embrace that positivity now!”

 

  • Reward yourself for successes! “An action plan with steps not only gives you a manageable way to reach your goal but countless opportunities to celebrate small wins along the way,” explains Mitcheltree. So be sure to reward yourself (and others in the household) for achieving a goal or taking an important step toward meeting that goal.

 

“This is critically important when you are tackling a BHAG — Big Harry Audacious Goal,” she notes. “The journey is as important as the destination because that is where you develop grit. And grit gets you through this goal and onto the next.”

  • Regularly unplug from media. The constant stream of news and opinion about the pandemic, positive and negative, can feed a person’s sense of powerlessness and anxiety. Mitcheltree suggests turning off and tuning out the social media, television news, media pundits and other “noise” for significant periods of time. “It really helps you to be present in the moment, instead of living in the past or worrying about the future.”

 

  • Recognize you have reasons to be grateful. Remember the good things you have in your life: family, friends, a caring community, being an American. Show the people around you your gratitude, perform small acts of kindness for others and find ways to stay connected with people and causes you care about.

 

“We’re all in this same storm together,” says Mitcheltree. “There’s a lot to be said for connecting with one another.”

 

June 2020 — This column is provided by the Financial Planning Association® (FPA®) and FPA of Nebraska,  the principal membership organization for Certified Financial PlannerTM professionals.

FPA seeks to elevate a profession that transforms lives through the power of financial planning. Through a collaborative effort to provide members with tools and resources for professional education, business support, advocacy and community, FPA advances financial planning practitioners through every phase of their careers, from novice to master to leader of the profession. Please credit FPA of Nebraska if you use this column in whole or in part. The Financial Planning Association is the owner of trademark, service mark and collective membership mark rights in: FPA, FPA/Logo and FINANCIAL PLANNING ASSOCIATION.  The marks may not be used without written permission from the Financial Planning Association.