How to help protect personal finances during the coronavirus pandemic

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The coronavirus has disrupted life across America, but there are a few common sense tips that can help you keep your finances in check.

Fortunately, most of the following checklist items are reasonably easy to implement, without requiring a lot of heavy work. Many are actions that you should have taken anyway, but now they are more urgent.

If you’ve just lost your job, or are expecting it to happen soon, a few of these tips might not be practical. But most of the suggestions below don’t require a lot of income and, in fact, could help cut expenses.

Build an emergency cash fund

Financial advisers of all stripes had urged Americans to build up their funds for rainy days for the past decade or so when times were relatively good. Now that the clouds have gathered over the economy, the need is even more pressing.

Emergency money – preferably equal to at least three months of your normal spending needs – is essential now that the economy appears to be tipping into a coronavirus-induced recession. Cash on hand can be the difference between paying bills on time and having to accumulate balances on high interest credit cards or resorting to other expensive options such as auto title loans, payday loans or credit cards. pawn shops.

As part of new COVID-19 assistance guide for cash strapped people, credit.org suggests suspending all “fun money” and travel budgeting and directing those expenses towards constitution an emergency fund.

Check your safe

The threat of the coronavirus is changing banking operations, at least in the short term. Many banks have temporarily closed some branches, while others have reduced lobby hours.

I recently wrote about how it affected retiree Ray McCarty when Chase closed his branch in Bullhead City, Arizona, putting key documents like health guidelines, passports, and car loans out of reach. and real estate. Chase reopened the branch in a matter of days, but the lesson is clear: if you have a safe, go visit it soon to see what key things you might need to access in the next few months, and plan to do so. advance.

If you don’t have a safe, it might be time to buy one to protect your key assets in uncertain times.

Keep cash on hand

While banking lobbies may temporarily shut down, putting safes out of reach, this also suggests that ATMs may be shut down from time to time. With all the uncertainty around, it’s probably a good idea to have a few hundred dollars in cash on hand. This doesn’t mean hiding it under a mattress like many people did during the Depression – a foolish choice for long-term investment money – but rather a way to pay for small items in the blink of an eye. ‘eye.

Of course, credit cards, debit cards, and electronic payment options are still the way to go and will remain dominant payment methods. But having cash on hand can ease transaction problems in case some businesses get disrupted.

Assess your insurance needs

It’s a good idea to assess your P&C insurance needs once a year anyway. The upheavals of the coronavirus make it particularly timely.

Auto insurance is a good example. If you are now working from home like a lot of people, you are probably driving a lot less than before. This could result in savings in terms of reduced auto premiums, so check with your agent for a discount or shop around.

Likewise if your housing situation has changed. It is not yet clear whether home prices will rise or fall, which in itself could justify higher or lower coverage amounts. But you could have a new roommate under your roof to help you make ends meet. If this is the case, a cover for example, offering extended financial protection, is something to consider.

Update your health and other guidelines

As with an insurance report, this is the time to update or, if necessary, establish the main estate planning documents. One of the essential documents is a will or a living trust. But in times like now, with increasing infections, hospitalizations and deaths, look at health care and financial powers of attorney. These documents allow someone you trust to make key decisions on your behalf if you become incapacitated.

While you’re at it, review the person (s) you’ve named as beneficiaries on insurance policies, individual retirement accounts, your 401 (k) plan at work, and more. Make changes if necessary.

And in states like Arizona that allow them, it may be a good idea to draft or update a beneficiary deed, allowing a home to pass to beneficiaries outside of probate.

Evaluate Your Borrowing Options

Interest rates have fallen so low that all sorts of loan options could make sense, from refinancing your mortgage to finding a lower cost credit card. However, there is probably no need to rush into borrowing, as rates could stay low for a long time. You also need income to pay off loans, so if your job is in jeopardy, it may be beneficial to wait.

If you need to borrow money, one option is to borrow against your 401 (k) balance. This is often a quick and easy way to access cash in the blink of an eye as there is no loan application and no impact on the credit report. But if you cannot repay the balance (in the event of a layoff, for example), this amount would become taxable and possibly subject to an early distribution penalty of 10%.

The Coronavirus Aid, Relief and Economic Security Bill, which was on hold as of March 26, includes a provision that would increase the borrowing amount on 401 (k) loans to $ 100,000 against $ 50,000, said Ed Slott, founder of IRAHelp.com. But it discourages people from taking out loans except as a last resort – partly because of the possible tax consequences and partly because it could hamper the growth of their accounts.

Redo your budget

One way to assess your changing financial needs is to check where you are spending money now compared to a few months ago. Chances are, you’re spending a lot less on restaurant meals, bar visits, movie tickets, hair salons, and travel, but maybe more on home entertainment, groceries, etc. health spending and public services. Some of these spending adjustments will prove to be temporary, but others could be permanent changes. People are adapting.

Either way, budgeting can help you figure out where the money is going now. Remember to factor in payments that you might only make once every three to six months, such as property tax bills and insurance payments.

Make a financial inventory

With so much flow right now, you may need to quickly locate key documents or provide instructions for others to do it for you. In addition to estate planning guidelines, these can include bank, brokerage and retirement accounts as well as insurance policies, mortgage information, business records and more. Compile a list of important contacts such as your insurance agent, accountant, lawyer, doctors, and vets.

While you’re at it, try closing accounts or memberships that you don’t need, whether it’s for gyms, publications, shopping services, travel clubs, or whatever. In times of change, like now, you don’t need to waste money or face additional financial burdens.

Contact Wiles at [email protected] or 602-444-8616.

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