Coronavirus Financial Hardship

By now a huge percentage of Americans struggle financially. This pandemic has exposed to most people how unprepared they are for a disaster. Hopefully, going forward, we will be more diligent about saving for a rainy day and more financially responsible. Meanwhile, what can you do to survive financial devastation?

I’ve had to answer this question with most of my clients in the last couple of months. While many are in the same boat, still we all have unique circumstances, challenges, and resources. Below is information on resources available to most people. If you want help navigating your particular situation beyond these resources, please reach out and connect with me. I’ll be happy to help you sort things out.

First, you already know about government help for individuals and small businesses. Unemployment insurance benefits have been available for everyone, including self-employed people since April. As the original $600/week federal help runs out in a few days, more is on the way, although at a reduced amount. As little as $200 additional per week but could be much more. This week is important as the GOP works out the details of their proposal which they will debate with the House. As early as August 7, a new stimulus package could be signed by the President. As part of the new stimulus packages, your next stimulus check of $1200 will be on its way to your bank account as early as August 24th.

If you own a small business and have not yet applied for the PPP forgivable loan program, please do. This forgivable loan can be of great help to you. You can use your local bank or one of the Fintech companies out there such as Kabbage or Lendio to help you process the paperwork. Those two will shop for an underwriter of your loan and submit your loan to the SBA. It’s an easy process. Just follow the instructions, submit the paperwork they ask you to submit, sit tight and wait. The program still has money in it. The deadline was originally extended to August 8. Could be funded more. Could be extended longer. Things change daily. Keep your eyes on the news and act now to secure your PPP forgivable loan. Even a round of second PPP loans is proposed as of today, Monday, July 27th to benefit small business owners with 300 or fewer employees, and especially businesses with 10 or fewer employees.

The SBA has other options for you, like the Economic Injury Disaster Loans, Bridge Loans, and debt relief options. They all have favorable terms and can save your business. Check out their information page at https://www.sba.gov/funding-programs/loans/coronavirus-relief-options

National banks and credit unions now offer Coronavirus Hardship Loans to anyone who needs cash to pay rent, buy groceries, or pay medical bills. These range from $500 - $5000 and in some cases as much as $10,000. Banks have the discretion to determine the amount they can give you. With a low 3% interest rate, as well as delayed payments of up to 90 days, and flexible terms of 6 – 60 months, you could patch things up and avoid eviction, cover more expensive credit card bills, or unexpected expenses.

If you have good credit and generous credit lines, chances are you have the option to use “transfer checks” from your credit cards which usually give you 6 – 18 months at 0% interest, or as little as 1.99% interest with or without a transfer fee of 1 – 5% depending on your situation. You can write these checks to yourself and deposit them in your own bank account, making yourself a very cheap loan. Once that 6 – 18 month period is over, the remaining balance will convert to the regular interest rate your credit card charges, so pay close attention. Make sure you pay it off, or that you have another place to transfer the balance to in order to avoid getting hit with huge interest rates.

Most credit cards have reward programs. Check with yours and see if you have piled up some points which you can convert into cash which you can use to pay your credit card bill, groceries, or gas. When the pandemic hit, I had over $800 worth of points piled up on one of my credit cards. I chose to use them to pay for groceries, which lasted me almost two months. On another card, I had more than enough points to pay off the balance on that credit card. So, take a good look at what you can do with the rewards on your credit cards.

Side hustles are still a thing. Someone I know bakes pies and cinnamon roles once per week and sells them to neighbors and friends. Another client puts up music shows on Facebook and makes about $1200 per month from donations. Others make and sell masks. Essential workers may need babysitters or someone to make and deliver home-cooked meals. Think of what you could do to earn some extra cash while you have the time.

If you are lucky enough to have a 401(K), The Cares Act allows eligible individuals to make a coronavirus-related withdrawal of up to $100,000 from their retirement accounts between Jan. 1 and Dec. 31 without the 10% early-withdrawal penalty that would typically apply to those under age 59½. It also permits retirement plans to suspend loan repayments that are due from March 27 through Dec. 31, 2020, and raises the limit on loans made between March 27 and Sept. 22, 2020, to $100,000 from $50,000. You qualify when, because of COVID-19, you’ve had a loss from self-employment income, job offers rescinded, job starts delayed, or even when your spouse is experiencing financial hardship due to job loss or one of the above. Check it out…

I did not mention the mortgage relief options because I assume that by now everyone knows about them. But yes, those are still available. You can still apply. If you already have your mortgage on forbearance, you can ask for an extension. Your bank may be willing to work with you.

Meanwhile, if your mortgage is not on forbearance, you could get a home equity loan, or apply to refinance your home loan and reduce your monthly payment. With interest rates as low as they are, many people are jumping on this opportunity and will be saving thousands of dollars over the life of their loans.

Hack your house if you live alone and have extra rooms. Renting one of them out and sharing the utility bills with another person could be a mutually beneficial arrangement. A neighbor with an extra big lot cleared out the back yard recently, put in a fire pit, a porta-potty, and started renting out to campers. Airbnb is still a thing, even though it’s not as busy as it used to be. If you have a safe way to offer space in your home or a granny unit to travelers, consider it.

Move back in with your parents.

Share a household with friends.

Get a job delivering groceries.

There are options to financially survive this disaster. Remember, this will not last forever, but it could stretch out another full year. Do inventory your resources. Understand your options. Above all, do not go shopping. Do not spend on anything that’s not necessary right now if you are already strapped for cash. Hunker down and hope for a better day! It’s coming. You just have to be patient.