How to Manage Your Money During a Crisis

As we approach the half-year mark for the Novel Coronavirus (COVID-19) pandemic in the U.S., Americans continue to feel the economic pain of furloughs and layoffs, shuttered businesses, and an up-and-down stock market. If you are still in crisis mode when it comes to your finances, we can help! Read our best tips for managing your money during a crisis and then check out these other ways to get help from your credit union:

• Loan Pause Program
• Financial Planning

Take a second look at your budget and savings

The one bright spot amid the current economic news is that many of us are naturally spending less. If you’re not working right now, or you’re working from home, you’re probably saving money on your usual commute as well as convenience spending on food and coffee. You’re probably also saving money from spending more time at home and not going out to restaurants, bars, concerts, sports games, and more.

In addition to your natural reductions in spending, here are two deliberate ways to take control of your budget and savings:

Review your spending from the previous month.

If you break budgeting down to its essence, it’s just two numbers:

• Money coming in (your paycheck, child support, unemployment insurance, alimony, investment income, tax refunds, etc.)
• Money going out (bills, debt payments, savings, and discretionary spending)

If the first number isn’t larger than or equal to the second, you’re likely to fall into debt. So take a look at how you did last month (don’t worry about finding an “average month” since there’s no such thing) and notice any patterns in your spending. For example, are there any recurring/subscription payments you can cancel? Are you spending hundreds of dollars on groceries and then ordering takeout or throwing spoiled food away?

Planning a budget isn’t about judging yourself (or your spouse). Instead, recognize that money is simply a tool and a resource for meeting your needs and creating a fulfilling life. The more you know about your current spending habits, the better you can optimize them to keep the purchases that serve you and get rid of everything else.

Start or grow your emergency fund.

In an ideal world, you’d start building an emergency fund before crisis strikes. However, it’s never too late to get started. And if you have a modest savings already, you can focus on growing that more. Covid has taught all of us the importance of preparing for the unexpected. Here are the emergency fund basics you should know:

• Short-term savings should be kept in a deposit account, such as our regular savings account.
• Set a goal of having at least three months of living expenses on hand.
• If you need a more manageable target to get started, try $1,000.
• Automate your savings with recurring transfers from your checking account.
• Whenever you receive “extra money,” such as a gift or other unexpected inflow, consider putting half or all of it toward your emergency fund instead of spending it.

Don’t make any quick moves

If you’ve ever lost a loved one, you’ve probably heard some variation of this advice. Making rash decisions and big changes under duress usually leads to bad outcomes. However the pandemic is affecting you, chances are it’s stressful. Many of us respond to crises with a “fight or flight” instinct. To cope, focus on soothing your nervous system with breathing exercises, meditation, yoga, or whatever you find comforting. Implement a policy of “sleeping on it” before you make major decisions such as moving, buying a car, leaving your job, etc. While it’s true that a crisis can provide a much-needed wake-up call and/or clarify what’s really important, you want to make sure a decision is the best one before you follow through.

Take advantage of public programs for help

Whatever your circumstances, help is out there from federal, state, and local programs.

Unemployment Insurance

The CARES Act allows states to extend unemployment compensation to independent contractors, freelancers, gig workers, and others who are ordinarily ineligible for unemployment benefits. Contact your state’s unemployment insurance office to learn more about the availability of these benefits where you live. Additionally, states may offer their own extra benefits.

Small Business Funding

The Small Business Administration (SBA) offers a variety of Coronavirus relief options.

Federal Student Loans

If you have a federal student loan in repayment, your loan will automatically go into an administrative forbearance. No interest will accrue during this time and you don’t have to make your monthly student loan payment unless you want to.

Do whatever you can to stay out of debt

As we mentioned above, people often slide into debt because their expenses outweigh their income. Again, this is not about judgment or shame. If you lose your job and still need to feed your family, of course you’d use a credit card for groceries if you can. But as much as possible, try not to dig yourself into a debt hole during the pandemic. Money you borrow today is money you can’t spend on other things in the future. Here are a few key points about debt to consider:

Debt and your credit score

One sign of credit health is how much you utilize the debt available to you. Therefore, try to keep your credit card balance(s) at no more than 30% of the limit. High debt utilization will lower your overall credit score.

Consider the APR

If you need to use credit, reach for the card with the lowest Annual Percentage Rate (APR). You can find this information in your monthly statement or via your online account. Credit card APRs can range widely but are usually no lower than 14%.

Missing a payment

If you don’t make at least the minimum payment, you’ll be charged a late payment fee and your APR could go up. Furthermore, accounts that are more than 30 days overdue will be reported on your credit history and lower your credit score.

If you can’t make a payment, your financial institution(s) may be able to help.

Ask your creditors for help

Many banks and other creditors have advertised a willingness to help customers who can’t make their payments during the pandemic. From mortgages to personal loans and credit cards, call customer service if you need help.

Guard against financial scams

Scammers take advantage of crises to manipulate people’s emotions for financial gain. Coronavirus scams may be aimed at selling you a false product, such as a testing kit or cure, or gaining access to your financial accounts and/or credit cards. Check the FTC’s Coronavirus Scams page for the latest updates.

At SkyOne, we’re focused on you!

Throughout our history as a credit union, we’ve helped our members meet their financial goals and get through hard times. When you join the SkyOne family, you’ll find financial solutions your way. In addition to our complete menu of financial products and services, we offer a Loan Pause Program and Financial Planning for our members. You can also strengthen your financial fitness by reading more articles on our blog. Become a member today and let us help you through this difficult time!