Weathering the Storm

Weathering the Storm
A proactive approach to navigating financial security
by Alacias Enger

In the April 2020 issue, Gwen and Sami were featured as they sorted through debts both current and in collections. At that time, they had over $16,000 in total debt and nearly a thousand dollars in savings. Feeling highly motivated, they rapidly paid off $5,000 in debt. That’s when COVID-19 related restaurant closures began to negatively impact the food distribution company where Sami worked as a manager. Sami was required to furlough several people in her department and knew it wouldn’t be long before her supervisor was delivering similar news to her.

Sometimes, there is a storm brewing, and little can be done to avoid it. While the storm may not be avoidable, we can often do something in the moments before to prepare for it. In a situation where suddenly, your livelihood has become insecure, temporarily stop focusing on debt elimination and refocus on building as much emergency savings as possible. During times like this, agility is key. Gwen and Sami were originally planning to use their tax return to pay off a car loan but decided to change their strategy. They added these funds, plus whatever else they could save to their emergency fund. They successfully built up a $5,000 savings account before Sami was also furloughed.

One initial concern Sami had was about her health insurance. She had been using her employer’s group health insurance plan paired with the Early Intervention Program or EIP (Washington State’s ADAP) to cover the cost of her medications. When being furloughed, frequently an employer will allow the employee to remain on their group health insurance plan provided they make the monthly payments themselves. If a layoff is permanent, a former employee might continue coverage by enrolling in COBRA within 60 days. A layoff is considered a “special event” that allows the person access to purchasing a plan outside of open enrollment (typically within 60 days) through the marketplace, or possibly by being added to a family member’s plan. A third option for people experiencing job loss may be Medicaid, which has no enrollment period. Sami was given the option to pay to remain on her employer’s plan, but it was more cost effective to be added Gwen’s employer-sponsored insurance plan along with using EIP.

Another major concern is making sure you can pay for your housing. Sami was proactive in filing for unemployment and didn’t have to wait long to receive it. With the extra $600 weekly benefit from the federal government resulting from the CARES Act, Sami was still bringing home the same amount as before being furloughed. They knew this would be short-lived, as this provision of the CARES Act was set to expire at the end of July, and Sami’s unemployment compensation would be slashed in half. So, Sami and Gwen continued to save as much as they could to prepare for what lay ahead.

Gwen and Sami grew increasingly nervous as their ability to pay the mortgage became strained. This is where it pays to be proactive!

Many people have been struggling to pay their mortgages due to financial hardships related to COVID-19. The CARES Act put certain protections in place for homeowners that have been impacted by COVID-19 and have mortgages that are federally backed. Their loans may be placed in forbearance for up to 180 days with the possibility of an additional 180 day extension. Be aware. The CARES Act does not dictate what happens at the end of the forbearance period. Many lenders are granting forbearances and tacking the unpaid payments to the back end of the loan. Others are making the missed payments due in full at a future date. Gwen and Sami’s lender granted them six months of forbearance, with the possibility of extension. Once their forbearance period is over, they will have two options: either sell the home or modify the loan. Modifying the loan will reconfigure their payments to fit their current income and potentially extend the term of their loan. Gwen and Sami have elected forbearance and will proceed with the modification once it has been exhausted.

Gwen and Sami made some smart money moves by temporarily stopping their debt elimination plan and building up savings knowing that a layoff could be near. They were also proactive in addressing both their home loan and health insurance needs. Amid a pandemic, where unemployment is lurking around every corner, our financial moves will need to change. By protecting our homes and our health, we will be able to weather the storm.

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.