What a week! Things are changing so fast that it is hard to keep up. As we navigate the significant changes and economic impact of the coronavirus response, please remember to take time to be with your feelings. A disruption like this is going to create a lot of them, and if we can take some time to breathe, to feel, to ground, things will go so much better.
Many people are losing their jobs, losing their customers or having indirect impacts from the Covid-19 response. I have received many useful updates on financial help and support in the last few days, and so I am collecting them up here to pass on. The bulk of this information is US-based, but I am hearing about similar programs in other countries, so check with your own country’s organizations for what is available. The list is below my signature at the bottom.
If your income has changed due to the shutdowns, please don’t wait to reduce your expenses. It can be hard to take action sometimes, but the sooner you act, the better the outcome will be. List your expenses from largest to smallest, and see which ones you can turn off, decrease or defer. New government programs are being announced every day to help with this. Most of them are deferments, so the money will eventually be due, but a plan will help you figure out how to go forward.
If your income is good right now, this would be an excellent time to focus on your emergency savings account. If recent events are not a reminder of the need for one, I can’t imagine what would be. Take a look at your emergency savings. First of all – do you have a designated account? If you have the account, great. Next, check if you have three to six months’ worth of living expenses in it. If not, start putting a fixed amount into that account at the start of every month. You want to automate this, and make it right after your paycheque arrives. There is no such thing as “left-over money”, so transfer the money before you spend it. If you have debt that you are paying down, or other constraints, then just slightly increase the amount that you are saving now. You will always be grateful for it in the long run.
Also, if you have a steady income, support your local businesses that are struggling or those who have lost their income. I see restaurants that are doing take-out, musicians doing on-line concerts and offering lessons, and yoga studios going on-line. Food banks and churches are collecting donations. There must be plenty more.
I will be holding a free group call on Saturday, March 28th, from 2 – 3 p.m. US Pacific Time, for anyone who has worked with me before. It will be a chance to “get together” and to talk about best strategies to get us through this time. In case you have questions about the stock market, I will also be joined by Ann Fagan, CFP, whom I have worked with for many years. If you would like to join us, please RSVP to me, and I will send you the Zoom link. Sign-ups close on Friday at noon US Pacific.
Resources:
My thanks to Savvy Ladies, College Affordability Solutions and Gibson Capital Management for the following information:
US Federal taxes:
The IRS has delayed the April 15th federal tax filing and payment deadline. The federal deadline is now July 15, 2020 for both filing and paying your taxes. The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds are still being issued within 21 days. Filing electronically with direct deposit is the quickest way to get refunds.
The IRS has also authorized tax credits for small- and mid-size businesses and for self-employed people to cover the cost of sick leave due to coronavirus or for caring for family members, including child-care leave.
Visit the IRS website for coronavirus tax relief and the latest information.
US State taxes:
H&R Block has created a guide for consumers to provide information about your State Tax obligations. Here is a link to the GUIDE.
Federal Student loans:
The U.S. Education Department (ED) announced that borrowers can obtain an “administrative forbearance” suspending Federal Direct Loan payments, effective March 13 and lasting at least 60 days. To get it, you must request it from your FDLP loan servicer, either by phone or online.
If you are pursuing Public Service Loan Forgiveness (PSLF), think carefully before requesting this administrative forbearance. Any month in which you make no payment doesn’t count toward the 120 “qualifying months” you need for PSLF.
Borrowers will also get a forbearance suspending any payments that were more than 31 days late as of March 13, or that become more than 31 days late after March 13. You need not contact anyone to get this forbearance – your loan servicer will automatically apply it to your loans.
Interest on all student loans held by the government is automatically waived until further notice, effective March 13.
Visit the Federal Student Aid office’s coronavirus website for information.
Mortgages:
Mortgage lenders are offering to help people in trouble by providing hardship forbearance options. Contact your mortgage company if you need to have your payment decreased or paused temporarily. Cities and states are also working to halt evictions and foreclosures. New York recently announced that it will suspend mortgage payments for 90 days for borrowers who face financial hardship during the coronavirus. Note that you will most likely still have to pay back what you owe because your payment is not forgiven, but it will give you some time.
Credit cards:
Credit card companies may lengthen their payment deadlines, lower the APR on cards, or waive late fees. The companies will post announcements on their website or send emails to encourage customers to contact them if they are experiencing financial trouble. However, do not assume that your credit card company will do this – contact your credit card company directly if you are going through a financial hardship. (Be prepared to be on hold for a long time!)
Electric bills:
Many utilities across the U.S. have halted service disconnections and are waiving late fees and setting up flexible payment schedules. California’s PG&E is one of the utilities that has stopped service disconnection fro both residential and commercial customers. If you are having hardship, contact your utility provider.
Unemployment insurance is run by both the federal and state governments. States have their own eligibility requirements. For more information, visit the Department of Labor’s website.
The Social Security Administration has closed its offices for in-person services, but benefits and income payments will still be distributed. For more information, visit the SSA’s website.
And lastly (almost), please be alert to scams:
Recently released research shows that crooks and snoops have been rapidly registering vast numbers of potentially-malicious websites and sending out mass or scam emails as they try to make money from the pandemic. No bank will call you directly and ask for sensitive information like your account number and PIN. Share this information with family and friends who may be vulnerable.
Finally, regarding the stock market, courtesy of Bob Gibson, CFP, 23 March 2020:
Bear Markets Come and Go
The longest bull market in history lasted almost 11 years before coronavirus fears and the realities of a seriously disrupted U.S. economy brought it to an end.
If you are losing sleep over volatility driven by a cascade of disheartening news, it may help to remember that the stock market is historically cyclical. There have been 10 bear markets (prior to this one) since 1950, and the market has recovered eventually every time.
…
If you’re reconsidering your current investment strategy, a volatile market is probably the worst time to turn your portfolio inside out. Dramatic price swings can magnify the impact of a wholesale restructuring if the timing of that move is a little off. A well-thought-out asset allocation and diversification strategy is still the fundamental basis of good investment planning. Changes in your portfolio don’t necessarily need to happen all at once. Try not to let fear derail your long-term goals.