Coronavirus (Sars-C0V2), the virus that causes COVID-19, has thrown a significant wrench into the way of how many of us work, play, and live. For many, this has involved working from home when possible; for others, it means still going to work; and for some, it has meant job furloughs, or even lay-offs. Unfortunately, reduced income has been one of the very real short-term economic impacts of this challenging time for a number of people.
This morning I came across Ann Carrn’s article in the New York Times titled “How to Build an Emergency Fund in the Middle of an Emergency“. It caught my attention because it includes some really helpful tips for people to consider if they are experiencing or anticipating a financial crunch period.
I have summarized a few of the highlights of the article with some of my own below. Please refer to the full article for more ideas & important details.
- While cash assistance is on its way for many, you should make a plan of your own.
- Research suggest that even small cash cushions (~$250.00) can help reduce the risk of a family missing bill payments.
- Look closely at your spending & figure out where you can tighten your belt short-term – for instance, postponing any trips, temporarily switching to less expensive cellphone/cable/other subscription services or discontinuing ones you really don’t use anymore.
- Reach out to your employer to figure out what your hours/income likely look like for the next few weeks or month.
- Examine alternatives of possible sources of cash & existing credit.
- Set aside as much as possible any incoming lump sums (e.g. bonus, commission, income tax refund).
- See if your employer or community offer any hardship grants, loans, other programs.
- Start now to identify local and government resources available, such as food banks and food benefit programs, in case you may need them.
- In general, keep contributing to your retirement plan as much as you are able – your long-term retirement goals are still super important.
- Think carefully about tapping your 401k retirement assets for cash. Withdrawals can be subject to hefty taxes and fees. In addition, 401ks are “creditor” proof, and are an extremely secure place to hold financial assets in case you do run into financial difficulties.
- Make a budget and understand your immediate cash needs.
- Below is an excel spreadsheet I created to assist anyone who needs help in this process.
As I told a friend the other day, each of us is going to need different people, in different ways, and at different times to get through this unsettling crisis. So, as always, if you have questions regarding approaches to 401k planning, 401ks for Seattle small businesses, or other general financial wellness concerns, please don’t hesitate in reaching out to us.
In the meantime, stay healthy, stay safe. And wash those hands.