Seven Steps To Shore Up Finances In A COVID-19 World

Posted By T. Lee Sherbakoff, CPA/PFS, CFP® on Jun 19, 2020


Seven Steps To Shore Up Finances In A COVID-19 World

From Lee Sherbakoff,
The Nalls Sherbakoff Group, LLC.

Dear Friends,

Since the economic crisis began, we have shifted our focus towards financial planning content that incorporates the COVID-19 crisis and its impact on your finances. For example, we have highlighted the scams that have sprung out of the pandemic. Be careful, new ones pop up all the time. We have written about new rules that make it easier to tap into your IRA if you’ve been affected by the coronavirus. We have also counseled on ways you might financially right yourself if you have been laid off and are nearing retirement.

Let’s now look at various ways you might shore up your finances in today’s uncertain world.

If you are single, take control of your situation. If you are a couple, sit down with your partner and craft a plan. It’s important that both of you are on the same page. These are guidelines, and we are here to assist if you have any questions. Feel free to share with family members and friends who might benefit.

  1. Now is the time to build up an emergency reserve of at least three to six months. You don’t know what the future may bring and savings will help you weather a job loss, if it were to occur. If you have been laid off, the federal government is providing an additional $600/week in unemployment benefits. Some are earning more unemployed than when they were working! If you are in this situation, use the extra cash to build up your savings.
  2. Start saving. If you met the income criteria, you received a stimulus check of up to $1,200 from the federal government ($2,400 if you are a couple). Now it’s time to eliminate unnecessary expenditures. Lockdowns have made the task easier, but now we are reopening the economy. We understand forced closures had a devastating economic impact. However, outlays on gasoline, Uber, car repairs, entertainment, eating out, and much more have been curtailed. Build up your rainy day fund.
  3. Do you have a mortgage? If so, record low rates could save you hundreds of dollars every month. Review the numbers and determine if refinancing makes sense.
  4. Are you or a family member making monthly payments on federally backed student loans? Through September 30, 2020, payments for student loans owned by the federal government are suspended and the interest rate is zero. No action is required by you. If someone contacts you and can stop payments provided you pay a fee, hang up the phone or ignore the email. This is a scam. Your deferred payments will allow you the opportunity to build up your savings. Or, if your finances are solid, any monthly payments will go entirely towards principal, enabling you to pay off your loans sooner than anticipated.
  5. Consider college refunds and your 529 plan. With lockdowns, dorm closures, cancelled meal plans, and online learning, you may be due a refund from your college. If you used 529 funds, your refund becomes a taxable distribution and is tagged with a 10% penalty. Normally, you have 60 days from the date of the refund to redeposit the funds without liability. That period has been extended. If the 60-day period ends on or after April 1, 2020 and before July 15, 2020, the redeposit can be made any time before July 15, 2020 or 60 days after the refund date, whichever is longer.
  6. Do you need financial assistance? Contrary to popular opinion, banks don’t want to get tough with borrowers. A bank’s business model is based on repayment of loans, not foreclosures. In today’s environment, many banks are willing to work with you, but you must reach out to them. The same holds true for utilities and other monthly services.
  7. Mortgage forbearance programs may be available for those who have lost jobs due to the pandemic. Be sure terms being offered are reasonable. Again, reach out for assistance. Simply stopping payments will quickly get you into trouble.

Please recognize you are not in this alone. We are here to assist you as you formulate a plan. The steps above offer a broad overview. Taking action is critical. It’s half the battle. Be proactive, not reactive. You may find you are in a much better position than you realized, which will relieve an enormous amount of stress.

We hope you’ve found this review to be helpful and educational. If you have any questions or would like to discuss any matters, please give us a call.

Stay safe and stay well.

The Nalls Sherbakoff Group, LLC

DISCLOSURES: The information provided in this letter is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as investment, legal, or tax advice. The Nalls Sherbakoff Group, LLC makes no warranties with regard to the information or results obtained by third parties and its use and disclaim any liability arising out of, or reliance on the information. These indexes reflect investments for a limited period of time and do not reflect performance in different economic or market cycles and are not intended to reflect the actual outcomes of any client of The Nalls Sherbakoff Group, LLC. Past performance does not guarantee future results.