Financial Peace in a COVID-19 World
Whether it is the uncertainty of lost employment, or the anxiety of waiting in line at the grocery store while masked employees usher you forward (as my wife said to me the other day “grocery shopping just isn’t fun anymore”), peace can be in short supply in this season of social distancing. For many, this can be compounded by financial anxiety resulting in stress in marriages and families with little “personal space” to deal with it.
We recognize that we aren’t in control (thankfully we have a Heavenly Father who is), but want to provide some practical ideas / steps that you can take if you find yourself among the millions experiencing financial anxiety in these uncertain times.
Income
If you’ve been watching the news recently, chances are you have heard of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that has recently passed Congress. We’ve tried to summarize below the key provisions of that legislation that might impact your income:
Economic Impact Payments providing up to $1,200 / person ($2,400 / couple) + $500/child under the age of 17
There are income caps based on your adjusted gross income (AGI) starting at $75,000 for an individual or $150,000 for a couple filing jointly
Action: For most, no action is required here! The IRS will deposit your payment into the account you last used for your taxes based on your most recently filed tax return. If you haven’t previously filed or the IRS doesn’t have your direct deposit information, Treasury plans to create a website for you to provide that information to allow you to get paid more quickly rather than waiting for a check.
For more details, the IRS has published guidance
For those who have lost their jobs (or had their hours reduced), the act offers additional unemployment benefits:
Through July 31, the bill offers an additional $600/week to the normally calculated unemployment benefits
No waiting period (typically there is a week waiting period to claim unemployment)
Maximum duration of unemployment benefits increased from 26 to 39 weeks (in PA)
Unemployment benefits apply to workers typically excluded (“gig” workers such as Uber drivers, etc.)
Action: To apply for unemployment or see other frequently asked questions, this site from the Pennsylvania Bureau of Unemployment answers these questions, among others
Allows those impacted by COVID-19 to borrow up to $100,000 from your retirement without penalties
This applies to those who have been infected or experienced financial hardship from COVID-19
You will still need to pay income taxes on this money, but you can choose to spread the tax over up to three years
While this can be tempting, in the vast majority of cases early withdrawal of retirement in a market that just lost over 20% of its value (S&P 500) so far this year should be viewed as a last resort!
For those who have consistently contributed over the years it can be beyond discouraging to watch the collapse of the financial markets chip away at your hard-earned nest egg. It can even be tempting to “stop the bleeding” by moving your retirement to safer investments. Generally, the experts agree that this is a bad idea. Unless you need the money in the near term, history suggests that jumping off the financial roller coaster at the bottom (or on the way down) is among the surest ways to lose in the long run. Remember – retirement is a marathon, not a sprint!
Expenses (“Tightening the belt”)
No, this isn’t a comment on how we should all use this time to take walks and get in shape (not that I shouldn’t heed that advice as well). In uncertain financial times, it can be helpful to revisit some basic steps we can take to control our spending. I have noted below a few practical things you can look at to take control of some of the largest areas of spending.
Housing
If you own your home, and are experiencing financial hardship due to COVID-19, the CARES Act may allow you to suspend federally backed mortgage payments for up to a year. If you think this may apply to you (>60% of mortgages were Federally backed as of 2019), don’t just stop paying! Reach out to your mortgage carrier to see if this is something you can take advantage of. Note also that this “forbearance” is not forgiving your obligation to make your mortgage payments, just delaying them. You will still owe the missed payments and may even owe additional interest due to the delay so you will need to work with your loan servicer/bank to determine exact details for you.
If you own a home, check the interest rate on your mortgage. The response to COVID-19 has resulted in record-low mortgage rates. If you plan to stay in your home for a while (generally at least 5 years) it could be well worth the time to look at current rates. A 1% change in mortgage rates on a $100,000 mortgage can save you up to $20,000 over the life of a 30-year mortgage!
Student Loans
If you are among the millions in the US with Federally backed student loans, the CARES Act includes a provision where you can stop payments through September with no interest or penalties applied. Again, this is a deferral, not free money. This change should be automatic, but check your lender to confirm.
Consumer Debt
The best thing you can do about credit card debt remains “pay it off!” With interest rates frequently in excess of 20%, there are few things that can compare with credit card debt in its ability to siphon off your wallet. Make sure you have enough of a financial buffer to avoid putting the next emergency on the card, then get serious about paying down that balance. If you are looking for a good home for the CARES Act tax rebate, this is a great place to start! There are a ton of great resources out there to help you with this like the debt snowball.
Other Spending Thoughts
Transportation – Whether you have started measuring your fuel consumption in terms of “days per gallon” instead of miles, or if you have been filling up at the pump for prices you haven’t seen since the 90s, chances are you are spending less on fuel than you were the in last couple months.
Utilities – Whether you are heating the basement for your makeshift home office or cooling the house to keep the kiddos from tearing the place apart, you might notice an uptick in your utility bills. Pennsylvania is a deregulated state, so one thing you can do is shop your power. You may find that you can get a much lower rate on your electric bill by just taking a few minutes to shop it (and there is no change in your utility provider, so this is invisible to you)! One word of caution – pay attention to the term of your new power contract as many of these companies will significantly increase your rates once the term expires (you can shop it again to keep rates low).
Eating out - You may find that this spending naturally declines as we all hunker down at home. Continue to support your favorite local businesses with take-out options, but use this season to look at how much you normally spend on things like eating out.
Entertainment – This may not be the time when you want to cut the cable to save cash, but if you find yourself in a position where you need to cut back, remember there are a multitude of low cost subscription services available (Hulu, Amazon Prime, Disney +, Netflix, etc.). Pay for what you use!
Other – As we all stay home, many areas of spending will naturally drop (travel/vacations ☹, work clothes) while others may increase (Amazon, household spending, toilet paper!). There is no magic bullet here other than to track your spending and buy what you need).
Giving
The temptation may be to stop giving financially amidst the uncertainties of COVID-19, and for some of you that may be a necessary step (for you – if we can practically pray, serve, or help you in this time please check out our “care” site). Others, however, may come to realize that they will have additional (unexpected) income and actually have lower expenses during this season. If that describes you, consider doing more rather than less in this season to live openhanded with the resources God has entrusted you with (whether that means giving to Riverbend, other non-profits, or just being an extra- generous tipper as you support local business from their take-out menu!). We also want to say a huge thank you to those who have given sacrificially of their time and resources to allow us as a church to walk well with our community during this season (from at least 6 feet apart of course!).
Final thoughts
While the uncertainties of COVID-19 may be new ones, financial uncertainties are not. If you haven’t already done so, I strongly recommend taking the time (as a couple if you are married!) to come up with a spending plan (aka budget) and experience the freedom that comes when you know where your money is going and begin to make intentional choices to guide your financial future rather than letting life happen to you.
If you are ready to take the next step in organizing your financial life, here are some great resources to help you take the next steps:
For a limited time, Dave Ramsey is offering a free 14 day trial of his Financial Peace University resources. Whether you stay with it and go through the program ($130) or binge watch his 9 week lecture series online during your free trial period, there are some great resources here that are worth digging into.
Crown Financial Ministries has a lot of (free) resources to help you take control of your financial life (with a Kingdom focus).
We love you and hope this has been helpful! We are praying that in this season you grow closer to each other and to your Heavenly Father.
Philippians 4:6 “Be anxious for nothing, but in everything by prayer and supplication with thanksgiving let your requests be made known to God.”
Matthew 6:25, 33 “Do not worry then, saying, ‘What will we eat?’ or ‘What will we drink?’ or ‘What will we wear for clothing?’ For the Gentiles eagerly seek all these things; for your heavenly Father knows that you need all these things…But seek first His kingdom and His righteousness, and all these things will be added to you.”
Philippians 4:19 “And my God will supply all your needs according to His riches in glory in Christ Jesus.”
Article by Riverbend Elder, Jason McDaniel