2020 seemed to take the whole world for a ride with unprecedented hurricane, wildfire, and tornado seasons, social unrest, and of course, the COVID-19 pandemic. In fact, the United States saw economic disaster the likes of which hadn’t been experienced since the Great Depression. At the height of the pandemic, the unemployment rate across the United States peaked at a staggering 14.8 percent with some industries citing an unemployment rate as high as 39.3 percent. This mass loss of income alongside lengthy and destructive natural disasters has placed millions of Americans in dire financial straits. However, it needn’t always be this way. Even after experiencing an economic downturn, having an airtight plan can help those struggling with money start their financial recovery sooner during a crisis like COVID-19.
Gather Your Records
Of course, the best time to begin preparing for a financial slump is before it occurs, but there’s no time like the present to get started on building your own “go kit” that includes all your most important financial information, even if you’ve already been affected by the COVID-19 economic crash. We know that records don’t directly relate to saving you money but hear us out: the less time you spend scouring your filing folders for that one vital document, the sooner you can, say, complete an application for financial assistance. Keeping records having to do with your investments, property ownership, employment, and bank accounts in one easy-to-grab folder can serve as a starting block so the moment you foresee financial struggles, you can leap into action. Gather the following documents to make your financial recovery after COVID-19 smoother:
- Housing information: deeds, mortgage or rental payment records, or utility bills.
- Household information: identification for everyone living with you, passports or green cards, naturalization documents, marriage certificates, divorce decrees, social security cards, military identification, pet identification, and vaccination and microchip records.
- Insurance Documents: proof of renter’s/homeowner’s insurance, proof of vehicle insurance, and proof of natural disaster insurance.
- Banking Information: Bank account records, credit or debit card records, and savings account or retirement account information.
- Employment Information: Paystubs, Offer of employment, contracts, checkbooks, and tax statements.
- Estate Documents: wills, trusts, health directives, and powers of attorney documents.
- Medical Information: prescriptions, diagnoses, doctors’ offices, disability documentation, and health insurance cards.
- Important Contacts: lawyer, landlord or mortgage representative, insurance agent, case manager, and community or church contact.
Find Financial Assistance
Now that you’ve built your document “go kit”, you can use that information to seek out financial assistance from government or nonprofit agencies. Remember: you are not the only one in this position. There is absolutely no shame in utilizing the resources available to you to take care of yourself and your family. Besides, government assistance programs are paid for with taxpayer dollars. You’re just getting your money’s worth. Depending on your area of need, you may apply for assistance from any of the following agencies during COVID-19:
- Federal Emergency Management Agency (FEMA) for natural disaster relief
- Small Business Administration (SBA) for small business assistance (especially during COVID-19) or disaster loans
- U.S. Department of Labor for unemployment insurance
- Your State’s Department of Labor for unemployment benefits
- Nonprofit agencies for a wide variety of financial assistance
- Grants.gov for government, community, and nonprofit grants
Make a Budget
It’s time to get into the nitty-gritty of money management – making a budget. If you had a budget before your financial struggles, great! You likely need to alter some of your line items to accommodate your current COVID-19 situation. If you didn’t have a budget, that’s alright, too. Abiding by a strict budget can be challenging, but you’ll notice significant returns on your sacrifices relatively soon. Stick with it!
- Take a look at your monthly income (be honest!). This includes investments and other household incomes who contribute to running the home.
- Lay out your true monthly expenses. True expenses are things you need to survive like rent or mortgage, groceries, water, electricity, childcare, phone bill, and insurance payments. This part can be difficult if you struggle to prioritize what is essential and what’s not. Sorry, but Netflix isn’t essential. We’ll handle that further down.
- Add up debt payments. These payments should include your vehicle, student loans, and credit card debts.
- Calculate your “soft bills”. If your true expenses were the “hard” bills, then “soft” bills are the expenses you’d rather not live without but aren’t essential. Netflix lovers, rejoice! Your entertainment and software subscriptions belong in this category.
- List your savings goals. We’ll help here. Number one on your list should be an emergency fund. Afterwards, you can list goals to buy a new house, move, buy a new tv, or whatever you’d like in the future.
Now, compare the sum of all those expenses against your income and take deep breaths. You probably spend a lot more than you realized, and that doesn’t even include your splurge purchases like takeout. Fear not! You can cut down on some of these expenses, so you don’t have to live a totally joyless life while working toward financial recovery.
Trim the Financial Fat
Now that you have an honest list of inflow and outflow, this is a perfect opportunity to cut spending in spots that hemorrhage money. It’s time to get disciplined! Your splurge buys are not listed in the budget yet, but with the right trims to other places, you can still treat yourself every once in a while.
Start by seeing where you can cut spending in your expenses. Most of your bills are probably “hard” bills and are impossible to trim (like your mortgage), but line items like groceries are flexible despite being a true expense. Plan your meals weekly and opt for cheaper products in the grocery store. You can even start couponing to save more!
Next, you’ll need to look hard at your “soft” bills. How often do you really watch Hulu? Do you need your video game subscription? Is it cheaper to cut your cable cord and opt for a streaming service instead? You’ll be surprised how much you can save by sacrificing a little entertainment for a few months.
Lastly, are there savings goals that you can do without? You should never trim your emergency fund, but other goals like a house down payment or a new tv can probably wait a few months.
All the money you save from trimming the fat will be used in other, more important places like your emergency fund or on true expenses (or on the very occasional splurge).
Be Patient
Budgeting and saving are hard and slow. Depending on the extent of your current economic struggles, you may be living bare bones for several months or even a year. However, it’s all worth it. By the time your employment is secure and your income has increased again, you should have a decent emergency fund that will protect you should disaster befall you again. Remember: your road to financial recovery during COVID-19 is valid, even if you chose to hold on to Netflix as your “splurge” item while others do without. No one knows your financial situation better than you.
Once you’ve come out of your slump, you can add your trimmed expenses back to the mix, though many choose to simply carry on without them once they’ve grown used to life trimmed down.
Find Financial Recovery in the Inland Empire
Working toward financial recovery during and after COVID-19 will be a long road for many Americans. McCune Wright Arevalo, LLP, is dedicated to assisting individuals who may be struggling financially due to unscrupulous bank fees. With millions of dollars in successful settlements and verdicts on behalf of those victimized by unfair or deceptive NSF or overdraft fees, we hope to help Americans stand up to banks and credit unions that are making money off the struggles of the everyday consumer. If you suspect your bank or credit union is charging unfair NSF or overdraft fees, contact us today or call (855) 976-3154 for your free consultation. There is absolutely no risk or cost associated with a consultation. All cases are charged on a contingency basis.