Being Financial Stable Through COVID ft. MyPoint Credit Union
Many Americans did not expect the financial impact COVID-19 would have on their financial situations. With California state-wide orders to close non-essential businesses in an attempt to contain the pandemic, many Californians lost their livelihoods and financial independence. With only a small trickle of income coming in, many people are struggling to get enough cash flow to support themselves and their families. To support struggling families and individuals during this critical time, our partners at MyPoint Credit Union have shared with us some money-saving tips that can help stabilize your finances during COVID-19.
View the recording of the webinar here: https://bit.ly/2Yt1OG1
Timestamps are available to follow along in the webinar
Be smart with your bill payments
Some bills are more important than others. Essential needs, such as food and housing, will take precedent over other needs like child support and income taxes. Adriana Brunner, Business Development Manager for MyPoint Credit Union, recommends paying bills in this order (12:34):
1. Food, Medicine, Childcare
5. Child Support
6. Income Taxes
7. Unsecured Debts
Contact your creditors before you miss a payment. If you contact your creditors before you miss a payment, they can work with you in establishing a payment plan that can help keep money in your pocket. Before you call, be prepared to share your Letter of Explanation (LOE) that explains why you are unable to make the payment, along with your proof of hardship and how long you expect this to be the case. Determine what you can reasonably pay during this time and always ask for a written copy of the negotiated payment plan. Generally, payments are due on the date stated by the financial institution. Grace periods refer to the additional time that lenders allot to borrowers without being required to pay late fees. This period may differ with each lender and usually is about 10-15 days. If you and your spouse are sharing a joint account and miss a payment, it may affect both of your FICO scores. Reach out to your creditors before your FICO score gets hit by a missed payment. "Financial institutions are ready to receive those phone calls," assures Adriana. "They are ready to negotiate a payment plan, so if you're close to having a late payment, don't wait for the payment to be late." (17:36).
Track your cash flow with a budget, and cut expenses
Write down your budget. The best step to start cutting back expenses is knowing where your money is going. GreenPath has a budget worksheet that can get you started. You can download it here.
Find where you can cut back on expenses. Ask yourself the question, do you want it, or do you need it? According to Adriana, subscriptions are an expense that many people can consider cutting off, "The subscription industry is growing because it's easy to subscribe to things, and it's difficult to cancel subscriptions. So, a lot of people may have subscriptions to different items that they don't need." (23:21).
Refinance your loans and debts to pay them off faster. "The environment is so beneficial to try to lower these monthly payments," says Adriana (27:36). "If they have loan payments that are not considered at the market rate ... two years or longer ... they probably have rates that are two points higher than it is today." (41:28). Talk with your credit union and financial institutions to see if they have any promotions to cut your rates, and to see if it's worth doing so. Not only will you be able to pay off your loan quicker, but you will also have more money available. Adriana warns, "If they are paying two basis points over the market rate today, you are overpaying." (42:08).
Prepare for taxes early
Refer to a tax professional about taxes for unemployment insurance and benefits. For taxes on unemployment income, Adriana strongly urges everyone receiving unemployment insurance and benefits to refer to the IRS website and guidelines. Checking the IRS website and consulting with your tax advisor will keep you prepared and ahead of any taxes associated with unemployment income. Every family and situation is different, so it is better to always consult, prepare, and listen to a tax professional.
Keep your 401k savings intact
Do not withdraw money from your 401k. Adriana highly encourages you to consult your financial advisor and/or 401k representative before you withdraw money from your 401k. "The penalties to make withdrawals on the 401k is really high," she cautions (32:49). If you need the extra cash, she recommends applying to a personal loan or a line of credit with your credit union or financial institution, rather than touching your 401k.
It is possible to take out a 401k loan. While withdrawing money from your 401k may hit you with a hefty penalty, you can have the option of applying for a 401k loan. "Getting a loan for the 401k is different [than withdrawing], and they will have to talk to a tax advisor," Adriana explains (33:43). She also encourages everyone to, "Look at your liquid assets first and check any penalties with your financial advisor or 401k representative."
Balance your cash flow and 401k distribution. With a loss of a job, or cut in hours, you may not be able to make your usual contributions to your 401k. And that's okay. Adriana recommends a short-term solution, "Adjust your contribution so you can hopefully balance your cash flow in the meantime, and this is not something that will be long term." (34:37). She also recommends contacting your financial planner to establish a flexible plan for your situation.
Get personalized attention to your unique financial situation
Use as many resources as you can. There are many helpful resources available online that you should use, such as GreenPath. GreenPath Financial Wellness helps people make healthy financial choices and has partnered with MyPoint to create educational resources. They offer many FREE services to anyone, including sending copies of your credit report/scores, helping you budget, and giving personalized advice based on your financial situation. When calling their FREE toll-free number, let them know that MyPoint Credit Union referred you. Their toll-free number is 1-800-550-1961.
Although the COVID-19 pandemic has caught many of us off-guard and our financial situations have taken a dramatic turn, it is still possible to live financially stable through challenging times by taking these steps:
Save money received from unemployment income for taxes
Prioritize your bills/payments and write out your budget
Re-evaluate your budget and find expenses you can cut. Ask yourself: Do you want it, or do you need it?
Call creditors if there is a risk of a late payment
PSCDC would like to thank MyPoint Credit Union, Adriana Brunner, and Christian Batani for hosting their insightful webinar. You can find more tips, tools, and financial resources on their website here: https://mypointcu.com/learn.