In April, the nation saw a standstill which left thousands unemployed, on furlough, or with a pay cut as a result of efforts to flatten the curve of COVID-19. Less than half of Americans have a budget. Those who do or attempt to keep one see more financial success. By knowing and understanding their monthly expenses, everyone can take the first step towards financial success. Budgeting assists in recognizing areas where there’s over spending, controlling the outflow of money, and understanding all sources of income.
The most important thing anyone can do to achieve financial success is to save systematically per paycheck, as part of their budget, says Denise Fries, owner of Fries Financial Services, LLC. Even beyond the current unprecedented times, most individuals can think of a time where someone they knew became unemployed or experienced an interruption in their paycheck due to company decisions, sickness, injury, or another reason. It’s best to budget at all times, exercising good financial decisions while including savings in the budgeting process.
“What we, as financial planners, want our clients to have is [at least] three times their monthly expenses saved away in a checking, savings, [or] money market account,” says Fries. This way if something does happen, people are still able to pay their bills. “By saving a little in each paycheck, you give yourself a cushion.”
The first things anyone should do after experiencing unemployment, furlough, or a pay cut is to reach out to the people and businesses they pay money to on a regular basis, says Fries. The most important thing is to be in communication with the company.
Entities such as a mortgage company, landlord, or credit company will be able to discuss options which would be beneficial in deciding which payments to make while becoming financially stable. It’s very important to big companies right now, especially banks, to appear to be a part of the solution rather than the “bad guy bill collector,” she says.
There are many generous offers to assist customers during this time, which enables someone to have more flexibility in their financial decision making, says Fries. Some car loans will allow customers to make their payment for the month in the future instead if they need more time to situate themselves financially. What this does is change the length of your loan, as it may not matter so much at the end that there are two more months’ payments, and it may mean a lot right now to not have a monthly payment for a couple of months. Another very generous offer comes from credit card companies allowing a person to postpone their payment with no additional interest fees.
“Companies don’t know you need help if you just ignore them,” says Fries.” They don’t offer you things if you don’t contact them.”
Another step in readjusting a budget is to examine expenditures on non-essential goods and services. Fries says this tends to be a large expense for younger people as well as older people who may travel or cruise often. The government shutdown forced people to save money on entertainment due to the lack of access to sporting events, bars, or movie theaters, says Fries. Now that the state and nation are opening up again, people who have gotten used to not doing those things should continue to limit spending in those areas until they reach financial security.
“If they’ve already done everything that they can to try to cut their expenses and they still aren’t going to meet their expenses, they can look at creative ways to solve for the lack of income,” says Fries.
People in a tight place can look into increasing their income as a supplement to cutting their expenses. The best way to earn additional money is by using personal talents and skills during the period of time where regular employment is unavailable, says Fries. Even with the closing of businesses, those goods or services are still needed by customers.
A post to social media to notify the community of someone’s availability for hire in areas they are talented in, such as web design, can make all the difference. She says hobbies can also be money producing, such as photography, pet sitting, and creating scrapbooks or painting. With the increase of home-bound workers, there’s a greater need for babysitters to help manage school-aged children in the middle of summer. Tech-savvy individuals could also benefit from assisting others who are working from home and are not as tech savvy. These jobs pay immediately and require little if any training. Many places hiring short-term or part-time, like McAlister’s Deli, will compensate their employees within 24 hours of working. Several delivery positions have also become in demand and are good options for those looking to earn extra money.
“Uber used to be the thing that almost everybody could do to make additional money. Obviously that’s not an option right now, but there are businesses whose positions would be considered temporary places,” says Fries. “Not your ideal job, not your career job, maybe not what you went to school for, however, they actually pay.”
Under normal circumstances, Required Minimum Distributions out of retirement plans are required for those of age 72 or older, says Fries. However, you do not have to take a Required Minimum Distribution from your retirement accounts in 2020 as a result of the financial legislation. Fries recommends the distribution not be taken if the person doesn’t need the money, as it will be taxable income. Those with a retirement plan can allow their money to grow and remain accessible for them in the future.
The government allows this because the stock market has gone down, Fries explains. “People don’t like to sell their shares of their retirement account stock portfolio when the stock market is down so it’s a nice thing they’ve done to say, ‘Well, you don’t have to take it,’” she says.
Experiencing an increase in income creates a need for budgeting as well, says Fries. Many people are in a position where they’re making more money being on unemployment than they made in their jobs, and because of the decrease in non-essential spending, are in need for budgeting so as to prevent wasting the extra money. Extra money, such as the government stimulus money or any additional money received from unemployment compensation, would be best used to pay off debts from the highest interest rate to lowest.
However you choose to readjust your budget, one thing is clear — it’s important to be money-wise and diligent at all times so the hard times don’t hit as hard!
