how to get your finances in order during coronavirus
Wash your hands, stop touching your face, avoid all contact with people, if possible. These are sage recommendations from the Centers for Disease Control and Prevention (CDC) to ensure your health during the coronavirus (COVID-19) pandemic.
But what about your finances?
Here are actions you can take today to best ensure your financial stability.
Check Your Emergency Fund
One of the biggest things you can do right now is make sure your emergency fund is ready. That way, if you lose your job, get sick or have to face some other calamity, you'll be as financially prepared as possible. Most experts recommend setting aside at least three months' worth of expenses—however, ideally six months—or even more—is better. If you're still working, then keep stockpiling money into your emergency fund.
However, most Americans don't have a large enough emergency fund. According to a Federal Reserve survey, 39 percent of Americans couldn't afford to cover a $400 emergency—and that was in 2018, before this whole pandemic happened. If you find yourself with reduced income or are out of a job, it's important to know that you still have plenty of options—you'll just need to get creative.
Now's the time to cut unnecessary expenses and find other ways of earning money, such as through an online side hustle or even a temporary job. Many grocery stores and delivery companies are hiring extra employees right now to handle all of the extra orders, for example. You can also seek out assistance from your local food bank, local government offices and apply for unemployment assistance.
Don't Touch Your Retirement Savings
Whether you have a 401(k), an IRA or some other type of retirement savings account, now is not the time to panic and sell. If you can get by using your emergency fund, let your retirement savings stay put.
Remember, the market will eventually recover, along with the value of the investments in your accounts. If you panic and sell now, you'll turn those paper losses into real losses. If you're nervous, simply stop checking your accounts so often—they'll do just fine on their own without you fretting over them like an anxious parent.
Check Whether It Makes Sense to Refinance Your Debt
One bright side of this scenario is that, with interest rates so low due to Federal Reserve cuts, there may be a good deal for you if you refinance your loans. You could lower your monthly payment and save thousands of dollars over the life of your mortgage, for example, if you can refinance for cheaper rates today.
However, make sure you run the numbers with a refinancing calculator. Refinancing has its own costs, so you'll need to see whether you'll save enough in the long run to outweigh these expenses.
A caveat is federal student loans. These come with a lot of protections. For instance, right now interest is suspended on these loans due to recent policy changes; for this reason, it's best to think hard before you refinance student loans, unless they're from private lenders.
Reach Out to Your Financial Advisor
Now is a great time to check in with your financial advisor and make sure that your overall financial plan is solid and ready for any coronavirus-related hits.
If you don't yet have a financial advisor, consider shopping for one, if that's financially feasible.
The coronavirus pandemic is scary for your personal health and the health of the economy. But just like when you go to the theme park, safety is first. If you take steps to prepare yourself financially—buckle up and stay calm—you'll be best be able to weather the storm.