As we head into another week under California’s Stay at Home order, more and more businesses are restricting their hours, some even closing entirely. Millions of Americans are now dealing with the stress of financial difficulty due to loss of income. If you are a part of this group, we have put together a comprehensive list of tips that you might find helpful in overcoming, or at least reducing, your stress.
If you are facing financial difficulty during this time
If you are one of the affected individuals who may have lost your job or seen a reduction in your salary, this might have you seriously worried about making ends meet. Although Congress has put together an emergency plan to help individuals affected by the coronavirus pandemic to continue to pay their bills, there are a few things you can do on your own as well to maximize your cash flow.
Now is a good time to prioritize your bills and make a list of what is critical and what isn’t. In a period of financial difficulty, you should also consider cancelling auto-debit on your payments so you can effectively manage your cash flow. Contact your service providers as many of them may offer an option to skip payments or make fixed payments during these times.
File your tax return as soon as possible
If you are typically owed a refund and have had no major changes in your tax situation in 2019, you should look to filing your tax returns as soon as possible. The IRS has currently extended the filing due date from April 15th to July 15th; however, you are still able to file your returns now and get a refund.
You can also stop making estimated tax payments for 2020 now and catch up later in the year. In fact, you now have until July 15, 2020 to pay your first and second quarter estimated tax payments.
Contact your HR department
If you find yourself in a tight situation financially, you can contact your HR department to stop withholding federal and state taxes on current paychecks. This will give you more cash now and you can catch up on tax payments by increasing withholding toward the end of the year.
If you are currently saving into a 401(k) account, you can also contact your HR department to stop contributing. It is better to halt savings for a few months than to acquire credit card debt.
Take a loan from your 401(k)
If you need a loan to alleviate financial difficulty, one good bucket to dip into is your 401(k). Most plans allow you to take a loan from this account and any interest due is put back into your account. So, if you need to take a loan, consider dipping into your 401(k) rather than a bank. Under new rules, you can borrow up to $100,000. You can also take a distribution of up to $100,000 from your IRA without penalties. The tax will be payable over two years (beginning next year) or you can avoid tax altogether by returning the money within three years.
Refinance your mortgage
With the recent reduction in interest rates, it may be a good time to refinance to lower your monthly payment. If you are currently paying PMI on your mortgage, it may also a good time to refinance, especially if your equity in your home is greater than 20% of the value of your home. You can also roll any closing costs into the total amount of the refinance to keep immediate costs to a minimum.
Delay mortgage payments
If your mortgage is owned by Fannie Mae or Freddie Mac, you may be able to suspend mortgage payments up to 12 months if you have been affected by the COVID-19 crisis. Many banks have also followed suit. The Federal Housing Agency has further announced a nationwide eviction and foreclosure suspension for all borrowers of Fannie Mae or Freddie Mac or whose loans are backed by the FHA. To find out if Fannie or Freddie owns your mortgage, you can search your address on this federal government site.
Additionally, federal regulators have told landlords whose mortgages are owned by Fannie or Freddie that they too can use forbearance, just as long as they do not evict tenants after they pause their mortgage payments. However, the challenge for renters will be figuring out whether their landlord has such a mortgage.
Transfer all current credit card payments to a new credit card with 0% interest
If you have good credit, one of the things you can do to save money right now is transfer your current credit card balance to a new 0% interest card. If you are a member of Cal Coast Credit Union, they are providing automatic loan payment deferment for 60 days. In addition, they are also providing new loans with 0% interest and/or an extended loan payment deferment period.
Halt student loan payments
The Department of Education has temporarily reduced student loan interest to 0%. In addition, it is also providing borrowers with Federal Direct and/or Federal Family Education Loan Program loans the ability to suspend payments for 6 months without hurting their credit. If you are experiencing financial difficulty due to COVID-19 and would like to halt payments, please contact your service provider to do so. If your loan is more than 30 days past due, you are automatically put into forbearance with 0% interest. It may take up to 30 days to update your accounts, so don’t panic if you do not see it right away. Forbearance will run until 03/31/2021, but this end date may be changed.
Please note, this waiver does not apply to private loans. However, several lenders such as Sallie Mae and Navient have declared similar provisions. Please contact your lender for further information.
One important item to note is that you don’t have to lose your job in order to be eligible to receive unemployment insurance right now. If you are quarantined or furloughed or even self-employed with no money coming in, you may be eligible to receive unemployment insurance. Eligibility and benefit amounts are state specific, but typically you may receive up to 45% of your income for up to 26 weeks (or as little as 14 weeks in some states).
If you have lost your insurance coverage at this time, please remember to purchase a new policy at Covered CA. Several states such as California, New York and Washington have opened enrollment to allow people to purchase subsidized health insurance. Based on your reduced income for 2020, you may be eligible for a policy with reduced premiums.
There are also several free resources available during this time
United Way of San Diego County is offering emergency assistance to low-wage workers affected by pandemic-related layoffs or reduced working hours to help pay utility bills and housing payments. Applications for the San Diego Worker Assistance Initiative can be found at https://uwsd.org/covid19/.
ICIC has created a Small Business Resource Center (SBRC) which hosts several national and local resources aimed at supporting small businesses through the COVID-19 crisis. Visit this resource here: icic.org/small-business-resource-center-covid-19-crisis.
The Jewish Family Service San Diego (JFS) has created a COVID-19 Emergency Response Fund to offer direct financial assistance with the following:
– Rent and mortgage assistance
– Medical expenses
– Food expenses
– Cleaning and household supplies
– Medicine/prescription expenses
– Childcare expenses
JFS also has programs in place to deliver meals and free grocery and hygiene items. If you are in need of these services, please contact JFS at (858) 637-3210.
The Jewish Community Foundation San Diego (JCF) has established funds to support those who are most vulnerable and impacted, primarily those in San Diego’s Jewish Community. The first of these is the Vulnerable Local Populations COVID-19 Fund which focuses on providing aid to those who find themselves without a paycheck or with significantly reduced income. There is also the Public Health Response COVID-19 Fund which offers funds for scientific and health care communities to help address the public health threat posed by the virus. For more information about these funds, please visit the following link: http://campaign.r20.constantcontact.com/render?m=1102100429865&ca=ef8f1c39-c857-4b8d-98ba-e80e6c216cb8
Lastly, the San Diego Foundation has established the San Diego COVID-19 Community Response Fund with the goal of providing emergency grants and interest-free loans for nonprofits working to provide the region’s most vulnerable communities with assistance. These grants are given on a rolling basis, meaning you can apply at any time and decisions regarding the funds are made several times per year.
Remember, we are all in this together!
If you are facing financial difficulty during this time, you are not alone. While the situation we are in is certainly stressful, there are many programs and options available to help you through it. We strongly encourage you to take advantage of the resources highlighted in this post to get through these trying times.