Preparing for a Coronavirus recession
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Years from now people will remember living through stay-at-home orders, social distancing, stockpiling toilet paper, and surviving the coronavirus recession. While the word “recession” can be scary, take a deep breath, we’re going to get through this together.
Change your financial future by making adjustments to your spending and saving habits today.
Prepare for a COVID-19 recession
- What a recession is and how it impacts the economy
- Financial relief available
- Figure out your debt
- Create a spending plan
- Long-term finances
- Side hustle considerations
- Looking forward
When a recession hits the economy
By definition, a recession is when the economy sees a downturn for six months in a row. With the coronavirus impacting restaurant, travel, and retail industries among others, we have seen a significant decline in economic activity. This signals that a recession may be on the horizon.
Dealing with an unexpected job loss has already had a devastating impact on millions of Americans. During a recession, it is common to see jobs vanish. The unemployment rate reached a record high of over 14% in April of 2020 due to many businesses being unable to operate during the coronavirus shutdown.
Although it’s unsettling to think about a recession, there are steps you can take to prepare your finances now! Let’s take a deep breath together and talk about those next steps.
Coronavirus recession relief
To help keep the economy working, the United States launched a $2 trillion stimulus in May. Stimulus Check FAQs can help answer any lingering questions you may have.
Numerica is committed to doing its part to help you get through a coronavirus recession. We’re offering several financial support options:
- Loan extensions
- Skip a Pay
- Emergency loans for Numerica members
- Waived fees for making payments over the phone
- Mortgage Assistance
- Forbearance options on loans for 30, 60 and 90 days
If you’re looking for additional support, we’ve gathered Federal, State, and Community Resources for you.
Figure out your debt
Credit cards. Loans (car loans, student loans, lines of credit). Mortgage/rent. Everyone’s debt looks different.
When trying to balance your finances, know that skipping payments, making late payments, or maxing out balances have a long-term effect. Delaying loan payments has serious consequences too. Understand the difference between deferment and forbearance if you go that route.
We can help you find debt solutions. For example, use the equity in your home to help you build an emergency fund or pay off those credit cards and student loans. A HELOC or a line of credit is a useful tool to eliminate high-interest debt.
Don’t pay debt with more debt
Payment history and available credit make up 65% of your FICO Credit Score. Keeping your credit score in good standing during a recession will help you immensely once the hard times are over. You’ll be able to purchase homes and vehicles at better interest rates by having better credit.
Don’t skip payments or use multiple credit cards to “rob Peter to pay Paul.” Tempting as this may be, it’s a really bad idea. If you feel this may be a route you need, don’t wait to reach out to your lenders. It’s much easier to find a solution before missed payments or delinquencies.
Student loans can be a major source of stress. The government has paused federal student loan payments (including interest) through September 30, 2020.
If you can get ahead, do it.
Pay more on your debt than just the monthly interest. Focus on paying the principal amount as quickly as you can. You would be amazed at what a big difference it makes.
If you’re in a place where you are wanting to make strides in paying off your debt, try the snowball method. This method focuses on paying off your smallest debt first and then rolling that payment onto the next debt when it’s paid off.
Create a spending plan
Budgeting your money
If you don’t tell your money what to do, it tells you what to do.
Been in a budget trap before? Budget 101 helps to break down the steps to get started and walks you through the money talk on starting a budget, refining a budget, and making your budget work for you.
Develop saving habits one day at a time by starting small. Having $500 in a savings account is a good initial goal. Then you can work toward building a three-month emergency fund. Once you reach that goal, go for a sixth-month emergency fund. Saving money is like climbing a mountain – one step at a time.
If you still have money from your stimulus check, set it aside in savings. Nearly half of all Americans couldn’t cover a $400 emergency. Without an emergency fund, you could be forced into debt and high-interest credit cards.
Grow your savings by considering something like a Round Up to Savings option where your everyday purchases can help to add to your savings.
Planning for the future when today seems so uncertain feels odd. Now more than ever, it’s important to be an advocate in your journey to financial wellbeing. Recessions eventually end.
Even in an uncertain investment market, withdrawing from things like your retirement (401K, IRAs) should be a last resort. Consider the consequences if you do withdraw money early.
Most retirement accounts give you the ability to hit the pause button and temporarily stop making contributions every month. Every plan is different, explore your options. And don’t forget to start them up again once the crisis has passed.
Consider a side hustle
Look for extra work whenever you can. It’s a great way to pick up extra cash and possibly turn a side hustle into a new business or a new full-time job. If you have a full-time job, all of your side hustle money should go to reducing debt or building your emergency fund.
Check out some of the most popular side hustles you can do from home.
Note that, if you’re collecting unemployment, side hustles can reduce your unemployment benefits. Also, side hustles are income and the IRS does expect you to pay taxes on any income earned. General contractors should set aside about half of every side hustle dollar earned for next year’s taxes.
Will there be a coronavirus recession? Could it be a depression? How will things look in the future? One thing is certain, there is no financial crystal ball. Life is in constant motion. So is money. Numerica works hard to be a partner with tools and resources through the twists and turns of life – all so our you are able to live well.
It’s important not to ignore financial stress. The sooner you take steps and make some of those adjustments to your budget, the more likely there are options for you. Reach out to us, we’re here to help.
After all, we’re all in this together.