Avoiding a Financial Pandemic

Avoiding a Financial Pandemic
Find Out What Options You Have to Survive Economically
by Alacias Enger

Starting in mid-March, it seemed that the entire world shut down. A global pandemic unleashed itself onto the world threatening the health and wellbeing of everyone in its path. For John and his wife, Tina, this has played out in their finances as well. John works for a high-volume, local bakery. When news about the coronavirus started to spread, John became immediately concerned about his own wellbeing. His health had been steady for some time now, and exposure to COVID-19 could create a negative health spiral that he would prefer to avoid. Just as John was preparing to inform his employer of his need to self-quarantine, word came that all non-essential businesses were being required to close. Fortunately, Tina is a teacher and has been work remotely. Even so, John’s lack of a paycheck placed significant stress on their already overextended budget.

close up torn one hundred dollar bill

Across the country, Americans have been blindsided by the financial ramifications associated with the public health crisis, COVID-19. While John and Tina have their own unique circumstance, there are a few key principles which can be broadly applied. First, if there’s any chance that you could experience loss of income, temporarily pause your debt reduction plan. Secondly, focus your priorities on the essentials: food, medicine, housing, utilities, phone, internet, and transportation. Once the basics are covered, you may move on to minimum payments on debts. Finally, find expenses to trim.

Pre-coronavirus, John and Tina had been paying off consumer debt and had a $700 emergency fund. After pressing pause on their debt reduction plan, they evaluated how much income would cover their basic needs. Tina’s teaching job supplies them with the insurance that covers John’s medications, and an income sufficient to pay for most of the essentials. Transportation, credit cards, online streaming subscriptions, and Tina’s student loans were usually paid through John’s income. So, they started trimming expenses.
On March 27, 2020, the Coronavirus Aid Relief and Economic Security (CARES) Act was signed into law to provide financial assistance to the millions of Americans like John and Tina who have been impacted by COVID-19. One provision of the CARES Act provides immediate relief in the form of stimulus checks for individuals with incomes under $99,000 ($198,000 for joint filers). These checks started being distributed via direct deposit in the middle of April in the amounts up to $1,200 for individuals, and $2,400 for couples (with an extra $500 for children under seventeen). Fortunately, John and Tina were among those who received these funds relatively early and saved most of it, using a little to help them make minimum payments on the remaining bills while waiting for John to start receiving unemployment funds. The CARES Act also expanded unemployment benefits. Individual states get to choose how they implement the program, but the federal government has created the Federal Pandemic Unemployment Compensation (FPUC) program which can provide individuals with an extra $600 of weekly unemployment funds. Once approved for regular unemployment benefits, John should be able to receive the additional FPUC funds through July 31, 2020, when the provision expires. Ideally, John and Tina would stretch the use of their stimulus check to supplement their income while waiting for John’s unemployment to take effect.

Meanwhile, there’s some opportunity to cut expenses beyond the switch to making minimum payments only. Many insurance companies have set up programs for people to receive partial refunds of auto insurance premiums as a result of driving significantly less miles. Since John and Tina haven’t been commuting to work, a refund of several hundred dollars may be possible.

Additionally, the CARES Act has provided student loan relief by automatically placing eligible student loans into forbearance through September 2020 and reducing interest rates to 0%. Payments made during this time will reduce the principal of the loan. Being a teacher, Tina expects to have her student debt forgiven under the Public Service Loan Forgiveness Program, but this requires that she makes monthly payments. Lucky for Tina, the CARES Act states that during this time, each month of forbearance will be treated as an on-time payment for purposes of forgiveness. It’s also possible to get a refund of any payments made dating back as far as March 13, 2020 if requested of her lender. So, Tina and John don’t need to worry about paying her $520 student loan payment until October and might be able to get their March payment refunded.

No one could have imagined that a public health crisis such as COVID-19 would financially paralyze so many. But, with programs enacted by individual companies and the CARES Act, help is available.

Alacias Enger is a performing artist, writer, and educator. She lives with her partner in New York City, and is the founder of blogs “Sense with Cents” and “Travel Cents.” Follow her on Twitter @sense_w_cents.