Addressing concerns about COVID-19 affected finances
FARMINGTON HILLS, MI (April 9, 2020) — COVID-19 continues to have unprecedented impact domestically and globally. More than 40 states have issued “stay home” orders, covering more than 300 million Americans. Almost 10 million U.S. workers filed jobless claims during the last two weeks of March.
Late March, Congress passed a $2 trillion stimulus package – the largest rescue legislation in U.S. history. This legislation, in addition to the Families First Coronavirus Response Act, provides direct cash aid to individuals and families, small business assistance, boosted unemployment insurance, paid sick leave and family and medical leave. Federal student loan payments can be paused for 60 days with interest waived. Tax Day has been delayed until July 15. Many states have initiated significant relief measures. Congress is weighing additional stimulus legislation.
Interestingly, April is Financial Literacy Month. The pandemic exacerbates the critical fiscal reality many U.S. households are facing. The Federal Reserve Board reported that 4 in 10 Americans would have difficulty covering a $400 emergency expense.1
Through its free phone-based financial counselling, GreenPath Financial Wellness and affiliates serve as emphatic ears for those economically affected by the pandemic. The national nonprofit has received thousands of calls and seen an increase in housing counselling requests, particularly. Many expressed frustration and confusion while seeking mortgage assistance. Other concerns include: insecurity due to sudden/imminent job and income loss; having limited or no savings; inability to pay for medicine, food and utilities, and manage debt. Callers seek direct cash assistance and specific help to pay for essentials. Many have misconceptions around stimulus checks (if it has to be paid back, tax impact).
Some recommendations the GreenPath team provides to callers include:
- Take a breath. Use this guide to help you navigate uncertainty.
- Prioritize Expenses. Use this worksheet to help you prioritize essentials: medication, food, utilities and housing. First, take care of immediate needs to stay healthy. Look for non-essentials that can be delayed or eliminated. Find ways to save money. Redirect funds typically used for other expenses (school, commuting or child-care). Put automatic recurring expenses/payments on hold if possible.
- Write down all sources of income. Your fiscal response will depend on your unique situation – if you are employed or not, have access to savings or not. Determine all available assets that can be used until you can resume working or replace your income. Use all employer benefits — vacation time and paid leave. Use funds received from the stimulus package, tax refunds, etc. as a bridge to cover essentials and help supplement income. Those without savings should carefully use and conserve stimulus funds. Check out benefits.gov, 211.org or contact your municipality about available food, utility, unemployment, tax and child-care assistance. Once essentials are covered for the weeks ahead, consider putting some funds towards emergency savings. Lastly, use stimulus funds and liquid assets towards credit cards and unsecured loans.
- Talk to your creditors about available hardship options. Many lenders including GreenPath’s 500+ credit union and financial institution partners will waive/refund fees, offer flexible payment options, deferred payments and loan extensions. Call before your payment is due. Be ready to share how much you can afford.
- Draw on Assets (with a Plan). Those with savings can use stimulus funds to bolster reserves. Draw upon cash savings and non-retirement accounts first. Treat use of savings as a “loan” to yourself. Write a repayment plan into your budget as soon as you can replace income. If you have retirement savings, you may be able to borrow against them. The stimulus package allows individuals to withdraw up to $100,000 that can be taken without the normal penalty applied for those below age 59½. Consult with a tax advisor first, as cashing out retirement assets should be considered a last resort.
- Carefully consider short-term debt. Those who have exhausted assets may be able to take on low-interest credit card or personal loan debt with favourable payment terms. Make a plan to pay off the debt after income is resumed. Carefully examine use of available credit via cash advances. These advances often involve higher fees that could balloon debt levels. They should also be considered a “loan” and a repayment plan should be budgeted. Be cautious about payday loans, title loans, etc. as they often carry high interest and may create financial difficulty long-term. Look out for scammers seeking to take advantage of vulnerable situations.
- Contact GreenPath (866-648-8122, https://www.greenpath.com/coronavirus/) for free financial counselling and to obtain financial health resources. Those facing foreclosure and have mortgage concerns should call the HOPE hotline (1-888-995-4673) for free personalized advice from HUD Certified Counselors. GreenPath and its affiliates will walk through your entire financial picture to ensure essential needs are covered, can assist you in talking to your creditors and identify ways to relieve stress and make it easier to bounce back.
About GreenPath Financial Wellness
As one of the largest financial counseling agencies in the nation, GreenPath Financial Wellness has assisted millions of people with debt and credit management, student loans, homeownership and foreclosure prevention. Headquartered in Michigan, GreenPath and its affiliates work directly with individuals, banks, credit unions and employer partners across the U.S. from more than 33 locations and through phone access and online tools. GreenPath is a member of the National Foundation for Credit Counseling, Michigan Diversity Council, Texas Diversity Council, and is accredited by the Council on Accreditation. To learn more, visit www.greenpath.org or call 866-648-8122. Follow the nonprofit on Facebook and Instagram @greenpathfinancial and on Twitter @GreenPath.