Back in 2018, roughly 40% of Americans said they would struggle to cover an unexpected $400 emergency bill. Jean Chatzky, an award-winning personal finance journalist and CEO and co-founder of HerMoney, says the COVID-19 pandemic has revealed how alarming that statistic really is.
“If you don’t have a reserve, you’re truly fragile when it comes to your finances,” Chatzky says, “and emergencies like this are more difficult than they otherwise would be.”
If you’ve been financially impacted by the novel coronavirus, here are some of Chatzky’s financial tips on how to weather the storm during the pandemic.
What are the financial implications of COVID-19 and what does this mean for the average American?
The financial implication, although it hasn’t been officially declared, is that we are highly likely in a recession. We don’t know how long it will last and we don’t know how deep it will be. Consumer spending has dried up, unemployment is higher than it’s been potentially since the Great Depression and markets are crazy volatile. People are finding themselves in a position where maintaining the financial trajectory that they’ve been is pretty precarious. We all need to take a step back and figure out where we are — what’s coming, what’s going out and where it’s going — in order to shore up our returns in case we need them.
Why is it important now more than ever to get a handle on your finances?
We are more responsible for our finances than any generation that came before us. We’re responsible for a bigger share of our health care costs and premiums. We’re responsible for more of our retirement savings. It’s up to us to manage our credit scores. We are in the driver’s seat, whether we like it or not. Any period of particular uncertainty when it comes to unemployment forces us to ask ourselves, ‘What do I have right now? How long can I make it last? What am I going to do if I come up short? And where do I go to help if I need it?’ That means doing an overall assessment of where you are right now because if you don’t look at your numbers, then you’re not going to have the information that you need to be resilient and maneuver.
If someone’s been impacted by the coronavirus, how can they protect their finances?
Divide your expenses into must-haves, want-to-haves and don’t-need-to-haves. If you’ve been impacted because you lost a job or you run a small business that has lost revenue or you’ve taken a pay cut as many people are doing, that requires going back to the basics. You need to look at your budget or make a budget if you don’t have one, and figure out what you actually need to spend your money on and what can fly, at least for now. There’s a lot of programs out there from lenders who are willing to work with their customers where you may be able to get some relief from payments that you usually make. But you need to understand what that looks like on the other side if you take advantage of that relief and how long your financial life can continue to function at that level.
What advice would you give to someone who’s lost their job due to COVID-19?
Apply for unemployment benefits as soon as possible. The $600 additional federal benefit is only there until the end of July unless they extend it. Even if you don’t use every one of those dollars to live on, putting them away gives you a longer lifeline. I think the sooner you can get some income, even if it’s not what you were making coming in, the longer lifeline you give yourself and then you can start to reapply to jobs in your field once things pick up again.
Some people may be wondering where to start when it comes to budgeting and saving during a pandemic. What are your recommendations?
I think the easiest way to start budgeting is to do it backward. Track your spending, take a look at where all your money is going and has gone over the past few weeks, and then look at where you can adjust. There are lots of great budgeting programs out there. The HerMoney community loves YNAB (You Need a Budget) — they tell us that all the time. You can also do a lot of good for yourself with a pencil and paper.
At the Simple Dollar, we have been following COVID-19 since the start. Check out the articles below for resources and the latest news on financial relief from the coronavirus.
- Where to Find Financial Relief During Coronavirus (COVID-19)
- Trump Suspends Student Loan Payments for Two Months — But You Have to Ask
- Laid Off? Here’s How to Apply for Unemployment Insurance
- The New Tax Deadlines, Explained
- How To Get Help With Your Taxes While Social Distancing
- 7 Insurance Companies Providing Coronavirus Support
- Coronavirus Mortgage Relief Is On the Way, But What About Renters?
- What’s Happening to Interest Rates and Why Does It Matter?
- Is Now a Good Time to Invest?
- Coronavirus and Your Car Insurance: A Practical Guide
- Coronavirus and Your Home Insurance: A Practical Guide
- Coronavirus and Your Life Insurance: A Practical Guide
- How to Get Cash Quickly During the Pandemic