Financial PlanningGuide to Survive Financially in COVID19 Quarantine

April 5, 2020

Guide to Survive Financially in COVID19 Quarantine

(So You Don’t Need Me After)

I’m a bankruptcy lawyer, and not a doctor. So you wouldn’t ask me about my opinions about whether it’s medically safe to wear a N95 mask if you’re playing online solitaire. With local and state governments requiring that businesses shut down, people stay in their homes to fight coronavirus, a new problem is created. For millions of people their income is gone, and their budget is thrown into chaos. To the extent I can help, here are tips to survive financially in COVID19 quarantine, avoid new debt, financial tips during quarantine, and come out of lockdown in good economic health.

It’s All About the Budget

I’ll say some basic truths here. It’s all about the budget. If you don’t have a budget, it’s time to make one. How much money comes in each month, and how much goes out? If you’re like most people, you have no idea about either of those numbers. But like testing people for coronavirus, you don’t know the extent of the problem and the best way to fix it until you have accurate data about the situation.

Income – Replace and Ramp Up

If you’re like millions of Americans, your paycheck just disappeared, and you did nothing wrong. So, the “in” part of your budget just got thrown out of whack. Yes, it’s true that many people will receive coronavirus stimulus checks. However, that’s not an income flow; that’s just a one-time cash infusion.

You’re going to want to find alternative and replacement income streams as soon as possible. One obvious one is applying for unemployment benefits. Now, unemployment income will likely be less than what you earned at your shuttered job, but it’s income. It’s cash money that you can spend on anything.

Alternatively, there are other jobs still operating in this locked down economy. Consider being a food delivery driver. Or applying to work at a supermarket. Or selling items on eBay (you never did need that collection of state spoons). Point is, times have changed, and it’s time to be creative. The internet is still on and open for business. What do you have that others may want or need?

Expenses – Cut to the Bone

Past: It’s been a good ride

During the good times, it’s a given that we spend whatever we earn. When we had our first job in high school, our entire paycheck was gone the next day. As our income grew over the years, weirdly, so did the things we “needed” to spend it on. The result is that by next payday, we were out. This is normal, and it’s bad, since no one saves. (that’s another story, but really, pay yourself first).

We’ve just completed the longest uninterrupted period of economic success. Ten years without a recession, and chances are, your income has gone up compared to where it was in 2010.  If you’re like most people, you’ve added a lot of expenses the past ten years you don’t even think about.

Present: Emergency Mode

If you’re going to survive financially during coronavirus shelter-in-place, you need to live differently. Not just social distancing, but spending distancing. Your budget is probably bloated with wants not needs. Cut them out! The economy is in emergency mode, and your personal finances need to go into red-alert status.

Break out the Statements

Look at your last three months of checking account bank statements (banks are essential businesses and still online; they offer statements free for download). If you can, actually print them out.  If the spending item on your bank statement is a debit like groceries at your favorite supermarket, don’t touch it for now. If it’s for gasoline, again, skip over it. Same for car insurance, utilities (electric, natural gas, trash, etc), medicine, and prescriptions.

Ink It

Now, take a highlighter or ink pen (red pen if you have one). For every trip to Starbucks, or your favorite daily food indulgence, put a line through it. For every Amazon purchase (assuming luxury purchases not needs), put a line through it. If it’s something you really didn’t need to spend money on, cross it out. And be honest with yourself. You’re not doing any favors by telling yourself you “need” that garden art of a 7-foot metal rooster chicken.

Kill the Repeating Account-Draining Robots

Banks and companies love it when you sign up for autopay. They get to automatically drain your bank account each month without you even thinking about it. It’s convenient, but over time, they start adding up. So, on those bank statements, take your highlighter and go over every item that is on autopay. If it drains your account each month or whatever, highlight it. Gym membership, Spotify, Pandora, Netflix, yep, keep going.

When you’re done, look at your bank statements. If it’s like those of many of my clients, it’s filled with crossed out “want” spending, and highlighted autopays.

Take action

Now, let’s take action on the three categories. For the (relatively few) unmarked necessities, see if you can get deferment or forbearance during the COVID-19 stay-at-home quarantine. I put out a list of banks and companies who are letting people skip payments during the coronavirus shelter-in-place lockdown.

Food: Visits to Vons aren’t highlighted, but it’s time to ask if you’re going to the market unnecessarily and buying things you don’t need. Are you using coupons? Are you still buying steaks, or have you scaled back to relatively inexpensive things that you can eat night after night like pasta, rice, and ground beef?

Gas: you’re probably driving less, but do you look at the gas prices, or just buy what’s convenient? If you pay attention, gas prices are higher at intersections, especially those of ‘name’ brands. You can save money buy filling up at Costco, or if you don’t have a membership there already, a place like USA Gasoline or maybe Arco. And if your essential travel during these times takes you out of a pricey superb into someplace where real estate prices are lower, gas usually is cheaper the farther away from a metropolitan area. If you’re there anyway, buy strategically.

Nonessentials: stop spending on lattes, toys, and Amazon. It’s time to hunker down. Yes, you deserve that pricey comfort food, but you also deserve to have money to spend for electricity tomorrow. Cut it out.

Recurring: discontinue the nonessential auto-siphons. Since we’re all locked inside, there’s a lot to be said for Netflix. But that and a Spotify and everything else start adding up. Be brutally honest with yourself. What can you disconnect? That health club membership you forgot is draining your account every month you haven’t visited since the first Iron Man movie? Disconnect. These are the stealth ninja expenses, and the ones you really want to eliminate if possible.

Stop Using Credit Cards

It’s super tempting to continue your lifestyle during a time of reduced spending. “It’s just temporary!” And while the income is down, you can keep the outgo flowing with unchanged or increased credit card spending.  This is a recipe for disaster. Stop using the credit cards, and if you can get deferment without affecting your credit, stop paying on them. Credit card spending can be the leak in your boat. Don’t hope the future you can afford to pay for the lack of sacrifice of the present you. Just stop using them.

If you continue using credit cards, you’re getting deeper in debt. Note: debit cards are your own money and of course totally ok to use for essentials during this time. But when you sign those credit slips, “promising to repay according to the terms of the cardmember agreement,” you’re vowing to pay this with cash money — which is reduced now — with interest.

The COVID-19 virus threat will pass, and guess what, it’s time to start paying the credit cards. The banks’ generous deferments will end. At some point, they’ll want to get paid. All the minimum payments will be barely affordable, if you can afford them at all.

And that’s what’s going to bring you to the office of this bankruptcy attorney.

So don’t. Just say no to credit, and try your best to live within the confines of your new reduced income.

Conclusion: Make Changes Like It’s an Emergency

I don’t promise that any of these suggestions will be painless, or easy, or that they’ll even guarantee a robust financial future. Each one, by itself, should help remove any gap in your new budget to help get you to the end of the Covid19 quarantine. Together, if we’re all going to survive COVID19 quarantine, it’s hoped that you have a budget where the money out is less than the money in, and you have the ability to save.

Because this government lockdown will end, and yes, the sun will come out. Income will go back up. But expenses don’t need to, nor do credit card minimums. With the right — and difficult — adjustments now, you can get through this. You can also have less pain waiting for you afterwards, along with some healthy financial habits to continue into the future, and hopefully never need the services of a helpful bankruptcy attorney like me.

I hope this helped, and stay safe.

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