Surviving a Financial Hardship

by Linda Jacob 

During this COVID-19 Pandemic, many people are experiencing financial difficulties.  A loss or reduction of income can be frightening, but there are many programs starting to become available for help.  So how do you know what to pay first? 

Start with the basics.  Housing, utilities, food, car, gas, and medicine.  Cut your budget down to the bare minimum.  Cut out all the discretionary spending such as entertainment and eating out.  You have to take care of you and your family first.  Doing this might also expose some budget problems that have been masked for some time, and are causing an increase in your credit card balances.  Use this time to evaluate your spending, and get help with your existing credit card debt.

After the necessities are paid, then you will want to pay your debt obligations.  These would include personal loans, credit cards, and private student loans.

Some of the help being offered comes in the form of deferred payments.  The creditor, utility company, or mortgage company will allow you to “skip” a payment, but keep this mind.  They are NOT forgiving the debt/payment, they are simply letting you pay it later.  It may or may not be due in one huge, lump  sum once this pandemic is over, so be very careful when taking advantage of these programs. 

For example, your utility company says you don’t need to pay your bill this month and still keep your electricity turned on.  Sounds great!  You decide to take the money you would have paid to them and take your family out for take-out food.  But next month, when this is over (hopefully) that utility company is most likely going to be wanting this month and last month in full.  You’ll be in for a shock when that bill comes in the mail.

Here’s another example.  You call your credit card company to ask them for assistance.  They agree to let you miss two months of payments.  You would want to follow up and ask how that will affect your credit score?   Will they be reporting you two months late to the credit bureaus?  What is the interest rate they are charging, and are they charging you late fees?  All of this could contribute to a substantial increase to your balance, and a substantial decrease to your credit score.

Best advice for getting through this?  Pay the necessities.  Drop all the extras, and save as much as you can.  If you need to take advantage of any of these programs, then please do so, but don’t take advantage of them just because you can.  Ask a lot of questions when you are thinking about one of these programs.  Having all the information is how you will make the best decision for you and your family.