Money Health

Reducing Expenses During a Sudden Financial Hardship

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Life is unpredictable. One minute, you’re getting the kids ready for school, and the next minute, you’re deciding whether or not you can actually send them to school. Fear and uncertainty can cloud our financial judgment, especially during health scares like the coronavirus, the virus that causes COVID-19.

According to the Centers for Disease Control and Prevention, COVID-19 is now classified as a pandemic. It’s only natural to feel anxious during a time where you want to keep your family healthy and your finances protected.

Freedom Debt Relief is committed to providing support and advice during this time. Emergency situations will arise, including government shutdowns, natural disasters, or a pandemic, so here are a list of things you can do now to help you reduce expenses and weather the storm.

Who might be facing wage loss due to an emergency

Low wage and hourly workers, contractors, freelancers and other workers could be the first to face financial hardship during an emergency. Your hours may be reduced or client work may slow down. If that’s the case, it’s important to have a plan.

First, think of the things you can control: your spending, energy and food usage, and your savings. Next, look for relief programs that could help you reduce financial strain in the short-term.

Cover the basics during financial hardship

Understand what you really need to spend each month to cover the basics: rent or mortgage payment, utilities, food, and gas. Do you need to cover medication expenses? What about insurance and any taxes or court ordered payments like child support? Take a look at your budget and add up what it takes to cover just the basics. Your emergency fund should be able to help cover these expenses.

If you don’t have a budget, sit down at your computer or grab a sheet of paper and put down a list of the bare minimum that need to be covered during an emergency. Then, look up past spending on those expenses to get an average. Add up each line item to get a bare bones budget. This is what you should focus on during a crisis.

Avoid emotional or stress shopping

While it is important to be prepared, you don’t want to overdo your shopping at the supermarket or elsewhere. Avoid “stress shopping” by taking inventory of what you have first. Peek inside of your pantry to see what you can prepare before heading to the grocery store. Staples like rice, pasta, beans, and canned goods can go a long way.

Next, if you find yourself aimlessly window shopping online, make sure your credit card information is removed from all shopping sites. Remove the temptation by removing your card. You can even use a free service like Unroll.me to eliminate marketing emails from your inbox.

Reduce “fun” expenses

Reducing expenses does mean cutting back on fun spending during an emergency, but it can have a dramatic impact on your emergency fund savings rate. Reduce unnecessary subscriptions, like streaming TV services or subscription boxes. Temporarily cut back on money spent on clothes, fancy coffee, décor, takeout food, and other nonessentials.

If you’re not sure how to reduce your expenses, you can try a service like Trim*. The Trim app can analyze your spending patterns and negotiate existing bills. Your budget could benefit from the app by quickly finding unnecessary expenses and removing them.

Manage your debt

Manage your existing debt stress and take action with your payments by making a few calls. Landlords and banks may be willing to provide flexibility  with your housing payments during times of need, so call them up. If you need a script, try using something like this:

“Hi, I have been impacted by [emergency]. I am experiencing financial hardship, and I’m curious what relief options you have to support those impacted by [emergency].”

You can try this script with other debt, like a car loan, private loans or credit card debt.

The latest list of relief programs we know about

As we try to keep some sort of normalcy, businesses and government programs are providing financial relief during the COVID-19 pandemic. Here are some of the latest, as of time of publication.

· Free coronavirus testing for every American

Coronavirus testing will be free for everyone who needs it, including the uninsured, as part of the emergency coronavirus bill. You’ll need to find your local public health laboratory or contact your state health department regarding questions about testing.

· Unemployment insurance benefits and paid sick leave for workers

In the emergency coronavirus bill, states will be issued emergency grants to help process and pay unemployment insurance. Some workers could get two weeks of paid sick leave and up to three months of paid family and medical leave.

· Internet providers pledge not to terminate service on unpaid bills

Federal Communications Commission Chairman Ajit Pai introduced the Keep Americans Connected Pledge on March 13, 2020. This includes no disruptions to service on unpaid bills caused by the epidemic.

· Interest waived on federal student loans

If you have federal student loan debt, your interest will be waived. Payments are still required, though your entire payment will go towards the principal which can reduce the total outstanding balance.

· Food assistance to children during school closures

All states, plus the District of Columbia and Puerto Rico, have received waiver approvals from the Food and Nutrition Service, enabling sponsors to serve meals at school sites and non-congregate settings in the midst of school closures.

· IRS tax deadline extended

Small business owners and individuals have an extended deadline on filing their taxes. This could come as a relief if you anticipate owing money.

· Small business relief

The U.S. Small Business Administration provides small business loans and access to capital quickly for those that need it. The SBA is expediting processes to make sure small businesses are still operational.

Other emergency situations beyond current pandemic

There is no possible way to predict the future, but we can be certain of one thing. Emergencies will arise. Sometimes the emergency is small, like a flat tire, or a broken cell phone. Other times, it can impact entire countries.

Other emergencies, like hurricanes, tornadoes, and economic recessions have happened in our lifetime. Instead of reacting to these situations, we can proactively plan ahead of time. Have an open conversation with your loved ones about how you’d like to respond in an emergency situation. Then formulate a plan to put in preventative measures for your safety, and your finances. Emergencies may be unexpected, but we can all take ownership and reduce the long term financial hardship for ourselves and our families.

*We are receiving no compensation for linking to Trim. This is just a suggestion we think our readers would find useful for tracking their expenses.

Justine Nelson is the founder of Debt Free Millennials, an online community to help millennials eliminate debt and live a debt free lifestyle. As a freelance writer and YouTuber, Justine enjoys creating upbeat and educational personal finance content. This Midwest millennial paid off $35k in student loan debt and now resides in San Diego with her husband.