COVID-19 Personal Finance Guide

COVID-19 has changed life as we know it. The untreatable virus has upended healthcare, shuttered businesses, and drastically slowed the nation’s economy.

Many states have issued stay-at-home orders and forced non-essential companies to close. These decisions are aimed at slowing the virus down, but it has put a significant strain on small businesses. As a result, many people are out of work, working fewer hours, or working from home while homeschooling children.

Given the uncertain times that the Coronavirus outbreak is causing, many Americans need to focus on their finances. To help find solutions, we’ve created this personal finance guide that explores:

Unemployment assistance
Mortgage and rent assistance
Managing personal credit cards, debt, and student loans
Overall financial health amid COVID-19

Unemployment assistance

Unemployment is quickly climbing. In early April, the national unemployment rate was at 4.4%, but experts believe that number will grow. Some predict unemployment will reach 15% when the next report comes out in May. If that’s correct, more than 20 million Americans will be out of a job, which will be the highest jobless rate since the 1930s, according to the Chicago Tribune.

To keep employees working, some small business owners applied for financial assistance through the Paycheck Protection Program, which is an SBA loan to help business owners pay employees, but funding ran out. While the government is working to replenish the fund, it likely means more layoffs.

Find more information on the Coronavirus Small Business Issues and Solutions Guide here.

Filing for unemployment insurance

To get financial help, file for unemployment benefits. Unemployment benefits vary by state, but the federal stimulus package known as the CARES Act, or the Coronavirus Aid, Relief, and Economic Security Act. The $2 trillion bill is meant to support businesses and individuals through the financial hardships caused by the virus.

Who is eligible for unemployment?

Unemployment is typically reserved for W-2 employees who are out of work, but under the CARES Act, more people will qualify for benefits, including people who are:

Gig workers (like Uber drivers, freelancers, or contractors)
Part-time employees
Not able to work because they’re caring for a sick loved one
Furloughed workers
Those offered a job before the pandemic but had it rescinded

How much money will I get?

The amount of money given out for unemployment insurance varies by state. The average benefit in the U.S. is about $385 per week, but some states are less generous and others are more generous.

To find out how much money your state provides for unemployment, look at this state-by-state breakdown of unemployment benefits from the U.S. Department of Labor or view the chart inside this Coronavirus resource from Vox.

In addition to each state’s unemployment benefit, an additional $600 per week will be added as part of the federal stimulus package.

How do I file for unemployment?

For W-2 employees, go to your state’s unemployment website.

It’s important to know that many websites are overloaded due to the dramatic increase in unemployment. Both the ability to file for unemployment and the time in which you receive money will likely be delayed.

Gig workers, freelancers, and independent contractors will file for benefits under a newly created program called Pandemic Unemployment Assistance. The program will be run through each state’s unemployment website as well, but it will take some time for all 50 states to add this feature to its website. Check your state unemployment website for updates.

When will the extra $600 a week show up?

Once you’re able to apply and receive benefits, experts say the additional $600 a week will arrive within three weeks.

For gig workers, freelancers, and independent contractors, the additional money will likely take longer since federal and state governments are still working out details.

Stimulus checks sent

As part of this massive stimulus bill, the Internal Revenue Service will send $1200 payments to individuals with adjusted gross income below $75,000 and $2,400 to married couples filing taxes jointly who earn under $150,000. The government will also pay $500 per qualifying child.

The checks started going out in mid-April 2020. Many people will see the money directly deposited into their bank accounts if the IRS has your banking information on file. Others will receive their check in the mail.

For those who haven’t received their stimulus money, you can track your progress on this IRS website.

Unemployment resources

For additional help, here are additional resources that focus on unemployment assistance:

Mortgage and rent assistance

One of the biggest bills most people have is their mortgage or rent. For many, the mortgage or rent takes up at least 30% of their budget. For those worried about making their monthly payment, here are some suggestions:

If you need to pause your mortgage payments

The CARES Act directs all lenders with federally-backed mortgages to suspend mortgage payments for up to 12 months for anyone negatively impacted by the pandemic.

If you elect to suspend or pause payments, it’s called a mortgage forbearance.

What’s forbearance?

A forbearance gives homeowners the ability to pause their mortgage payments for 180 days, or 6 months. At the end of that period, homeowners can extend it another 180 days if necessary.

At the end of the forbearance period, all of the money owed must be paid back. The payment can be made in one lump sum, or paid back in installments, depending on the lender you’re working with. Refinancing a home to include the past-due amount could also be an option.

During a forbearance, the missing mortgage payments aren’t reported to creditors.

How do I request a forbearance?

A forbearance allows homeowners to “pause” their mortgage payments for a certain period of time, but the money must be paid back. To request a forbearance, follow these steps:

Call the mortgage service (the company you pay each month)
Request a forbearance for 180 days. The term can be extended another 180 days, but it starts with one 180-day term.
There will likely be paperwork to sign to acknowledge the forbearance, but you won’t have to submit paperwork to prove your financial hardship.
Sign and deliver the paperwork to the lender.
Once approved, a mortgage payment won’t be due for six months.

The steps to request a forbearance may vary by lender.

Will a forbearance hurt my credit?

If forbearance is requested, the missing mortgage payments are not reported as late. Since they’re not reported as late, it doesn’t impact your credit score.

If, however, a homeowner stops paying their mortgage payments without requesting the forbearance from the lender, missing payments are reported. To protect your credit score, it’s best to request a forbearance rather than skip payments.

When should I request a forbearance?

The time to request a forbearance is when you can’t pay your mortgage payment. If you’re still employed, but are working fewer hours or are worried about losing your job, it’s best to continue to pay your mortgage until you don’t have the funds to do so. Of course, homeowners should contact their lender for customized advice.

While you should consider holding off on a forbearance, there are other cost-saving efforts to take. If job security is uncertain, it’s time to look at your finances and make cuts where you can.

Specific cost-saving measures are outlined below.

1. If you can’t pay your rent

The CARES Act offers relief for renters as well. Options differ based on what kind of rental property you live in.

If you live in federally-backed housing

People living in federally-backed housing can contact their Department of Housing and Urban Development (HUD) to apply for financial rent assistance. The CARES Act pumped an additional $17.4 million into HUD programs to offer rent assistance and housing vouchers to those in need.

The CARES Act also includes eviction protection for 120 days. If you can’t pay your rent, legislation prevents landlords from evicting anyone until July 25, 2020. At that point, tenants would have another 30 days to leave.

This doesn’t mean tenants aren’t responsible for paying rent during that time, it just means a landlord can’t ask you to leave.

If you live in a private rental

For people who rent a home from a landlord, there are programs that offer Coronavirus aid. The Fannie Mae Disaster Response Network, for example, can provide resources to help tenants.

The best way to handle the situation is to call your landlord and explain the situation. Ask the landlord if you can work out a payment plan or pay a reduced amount for a month or two. Landlords are more likely to work with you if you’re honest about the situation.

There is eviction protection in place as well. Federal, state and local legislation prevents COVID-related evictions from happening for 30 to 90 days, depending on where the home is located and the policies enacted.

2. If you’re a landlord

Many landlords need the rent to be paid to cover the mortgage on the home. If tenants can’t pay their rent it could put landlords in a challenging financial situation too.

For landlords who can’t pay the mortgage on a rental property, it’s possible to apply for a forbearance. A forbearance gives landlords the ability to pause mortgage payments for a specific period of time. However, once that time is up, the money must be repaid.

Under normal circumstances, renters who aren’t paying rent would be evicted. However, during this crisis, there are eviction bans in place.

For landlords of federally-backed housing, evictions can’t be served until July 25. Once served, tenants have one month to vacate. Landlords who are renting private homes are subject to different eviction bans, which vary by state and city for a period of 30 to 90 days.

3. If you’re in the process of buying or refinancing a home

For homeowners working to buy or refinance, the process will continue; it will just look a little different.

Remote signings and video conferencing

Many lenders and closing companies are working to handle paperwork and signings remotely. Using e-signature tools and video conferencing, real estate deals, and refinances are still happening.

Appraisal alternatives possible

Appraisals, which are often needed to sell or refinance a home, are changing too. Some companies are offering alternatives like drive-by appraisals or property inspection waivers. If an in-person appraisal is needed, companies are following all CDC guidelines and can coordinate at a time that minimizes contact.

Walking away isn’t easy

If the Coronavirus pandemic has you rethinking your home purchase, it won’t be easy to back out of the deal if you have put down a deposit and signed a purchase agreement. Legal experts in the real estate field say even people who have lost income due to COVID could not only lose their deposit but could also be liable for additional damages.

Mortgage and rent resources

For additional help, here are additional resources that focus on mortgage and rent assistance:

Managing personal credit cards, debt, and student loans

During financial hardship, it’s not easy to keep up with debt – especially if income has dropped or stopped. To help manage debt during the COVID-19 crisis, here are some tips.

Personal credit cards and debt

From car payments to credit cards, managing debt during the pandemic will be a challenge for many. To help manage debt, follow these steps:

1. List your debts

Take a minute to create a list of all debt. The list should include the company name, what the debt covers, the monthly amount owed, and the phone number of the company. With a complete list of debt, you can start reaching out to institutions for help.

2. Contact your creditors and explore options

Many banks, creditors, and financial institutions have created COVID-19 response plans to help their customers. If you can’t make payments, it’s time to contact these institutions to see if there’s any assistance available.

This applies to credit card debt, car loans, personal loans, or anything else with a finance plan.

Consumers may be eligible for the following breaks:

A payment forbearance (Pauses payments for a certain period of time, but the money is still owed in full at the end of the term).
Skipping a payment, also known as deferring payments, without accruing interest
Make lower minimum payments
Get a lower interest rate
Receive an interest waiver
Obtain a payment deadline or extension

3. Have late fees waived

To learn about these programs, contact your credit card company. Remember, a lot of companies are getting bombarded with calls right now, so consider trying a different route like texting or using an online chat. If you have the direct number for someone, use that rather than an 800 number.

4. Consider a balance transfer for credit cards

A lot of credit card companies are offering balance transfer offers. In other words, you could transfer the balance of your high-interest credit card to a card with a lower interest rate and try to pay off the balance in the designated time period. Even if you can’t pay off the balance, the debt won’t accrue as much interest.

5. Don’t pay off debt with stimulus money

People might be tempted to use their federal stimulus money to wipe out large sums of debt, but it’s a better idea to hang on to the cash for emergencies and carry the debt for a longer period of time, experts say.

6. Opt for a credit counselor

For those who were battling debt before the crisis and are only adding to it, a credit counselor might be an option. These organizations can provide some debt relief and help you come up with a debt consolidation plan.

Anyone who wants to go down this road should make sure the organization is accredited by the National Foundation for Credit Card Counseling.

Student loans

For students with student loans, the federal government has provided some assistance. Here’s what you should know:

Federal loans are suspended through 9/30

Federal student loans are automatically suspended through September 30, in accordance with the federal CARES Act. Payments were suspended on March 13 and will continue through September.

Federal loan holders don’t need to contact the lender or fill out any paperwork, the suspension is automatically done for you. Most students have already been notified of the change.

Interest rates set at 0%

The interest on all federal student loans is set at 0% through September 30.

Pay if you can

For students who can still pay their loans, the 0% interest means that any payment made will go directly to the principal. Simply put, students will pay off their loans faster by making payments now.

Contact private loan holders

Students with private school loans will need to contact their lender or loan service company. Given the situation, many students may be able to defer payments for a few months or pay a smaller amount each month.

Personal credit cards, debt, and student loan resources

For additional help, here are resources that focus on debt:

Overall financial health amid COVID-19

The Coronavirus disease has created uncertain times. There are talks of opening the economy again, but right now, no one knows when jobs will return, schools will open, or people will be able to shop, vacation, or even visit family.

The entire situation creates an uncertain economic outlook, which means everyone should take a look at their finances to make sure they’re making strategic decisions.

Here’s a list of things you can do to help protect yourself against the financial blowback of COVID.

If you’re still making money

If income is still coming in, even if it’s less, there are things you can do to make your cash go further.

Create or review your budget

If you have a budget, it’s time to review it. If you don’t have a budget written down, it’s time to make one. Write down all of your expenses, total them up, and subtract that from the money you have coming in.

Make cuts where you can

Even though you still have money coming in, it’s a good idea to trim anything that’s unnecessary or that you can’t use right now. For example, if your gym is closed, you shouldn’t be paying the monthly fee.

Add money to your savings account

If you have any surplus, it should be going to your savings account. Ideally, people should have enough money put away to survive for three months if their income dries up. Even putting small amounts into your savings account is worth it.

Donate, if you can

There are many, many people who need help right now. If you have the means to donate to your local church, food pantry, animal shelter, or another charitable organization, there is certainly a need.

If you’re out of work or drawing money from your savings

If you’ve lost your job or are working reduced hours, here are some ways to stretch your savings.

Create or review your budget

It’s time to create or review your budget. Everyone should know what their expenses are and what’s put away in the savings account. Figure out how long the money saved will last with current expenses.

Cut expenses

Without income, it’s important to cut unnecessary expenses. This may require making some tough choices, but it’s important to make these changes to make your savings last longer.

Eliminate memberships like those to gyms or spas, reduce cable to cheaper online streaming options, cut out services like cleaning services, landscapers, and pest control.

Now, reevaluate your budget to see how long your savings will last after eliminating these items.

File for unemployment

As mentioned above, if you’re out of work, filing for unemployment should be a priority.

While many states are experiencing problems due to increased need, it’s still important to get the paperwork filed as soon as possible.

Remember, the federal stimulus package opened unemployment benefits up to people who usually don’t qualify and provides an additional $600 per week in benefits.

Talk with creditors

Consider talking with creditors to see if they’re offering any COVID relief programs. This applies to car loans, personal loans, credit cards, and anything that’s financed. Maybe you can skip a payment, have the interest lowered, or pay a little less each month.

It’s always best to talk with creditors to find a solution rather than skipping payments without notice. The solutions will vary, but it’s always best to be honest and see what options are available.

If you have credit card debt or student loans, check out the tips mentioned above.

Talk with utility companies

Many states and counties have suspended cutting off any utilities during this time. While that may keep the lights on, it’s still best to contact the utility company if you can’t make a payment. Many companies are willing to make arrangements, like payment plans, for those in need.

The utility company may be able to direct you to additional resources that help homeowners temporarily pay for utilities.

Refinance loans

During an economic crisis, it’s not uncommon for interest rates to drop. It may present an opportunity to refinance a home or car. With a lower interest rate, you’ll have a cheaper monthly payment.

Apply for a home equity line of credit

If you own your home and are strapped for cash, consider a home equity line of credit, or a HELOC. This option lets you leverage the equity in your house and use it on an as-needed basis. Let’s say a homeowner is approved for $20,000, but only uses it to cover $8,000 worth of expenses. The homeowner only pays back what he or she used, which in this case is $8,000.

A HELOC is fairly easy to apply for, doesn’t require great credit, and gives homeowners access to a safety net. Remember though, it must be paid back.

Withdraw money from your retirement

As a last resort, people can withdraw their contributions to their retirement accounts without penalty amid the COVID outbreak. The federal stimulus package gives Americans the chance to withdraw up to $100,000 of their 401(k) or IRA contributions. The distribution will be taxed, but it can be spread out over the next three tax years.

Before withdrawing any money from retirement, it’s best to exhaust all other options like exploring loan programs or borrowing money from family.

Things to take advantage of during the crisis

To help manage your finances during the crisis, here are a few additional things to take advantage of:

File 2019 taxes later

A small win for taxpayers this year is an extended filing deadline. Typically, taxpayers must settle their tax debt by April 15. However, the federal government has extended that time to July 15. For those who have to pay the government, it gives them extra time to come up with the cash.

Earn air miles without flying

In the wake of the pandemic, people are grounded. Business trips, vacations, and weekend getaways have all but stopped. For those who are loyal to a specific airline, that means frequent flyer miles aren’t adding up.

Fortunately, many airlines have changed their policies and are now awarding air miles on other purchases like online shopping. For details on specific airlines, check out this list of airline policy changes sparked by COVID.

Keep your loyalty status

Since many people aren’t allowed to travel, many airlines and hotels have extended customers’ loyalty status. Most airlines and hotels have extended a person’s current status through 2021 regardless of miles flown or nights stayed. Reach out to your loyalty program to learn about specific changes to your status.

by Chamber of Commerce Team