Short of cash? Here’s some advice for families stretching their budgets: NPR
Discover the life kit
Updated April 13 at 5:06 PM ET
Forget paycheck to paycheck. Many families have lost their jobs during the pandemic and are short of cash while waiting for unemployment benefits and federal bailouts to arrive.
These are most unusual times, and family budgeting recommendations are also unconventional.
Kathy Hauer, a financial planner from Aiken, South Carolina, says she advises people to do things she’s never recommended before: “Make as many payments as possible and take care of them later.”
But, she says, don’t just ignore all the bills. Call all companies and ask for leniency – either a late payment or a new payment plan.
Hauer says this is a difficult time, especially for low-income families who don’t have much leeway in their budgets. You may not be able to borrow money from other family members. If they have bad credit, they cannot qualify for personal loans from banks. Many also do not have credit cards or are about to exhaust them.
Typically, personal finance experts advise people to avoid credit cards — and their high interest rates — like the plague.
But these days, Greg McBride, a senior financial analyst at Bankrate.com, says, “This is the only time it’s okay to make minimum payments on your credit card.” That at least buys consumers some time on their bills and allows them to to take care of the essentials.
Here is some of their advice:
Make a list of all the bills that are due in the next two months. Call each company and ask if they can delay your payment or offer you a cheaper payment plan.
About home, student and medical loans
- See if you can get a break on your mortgage. US regulators ordered loans backed by mortgage giants Fannie Mae and Freddie Mac offer flexibility in mortgage payments for up to a year. For example, some banks offer mortgage payment deferral options. Be sure to check the fine print, as some of these Agreements come with tough terms.
Courtesy of Dyan Navejar
- For renters: Many cities have requested one stopping evictions, but without offering much additional guidance. Larger companies may have more flexibility to accept late payments. Dyan Navejar, who lives in Lexington, Kentucky, says her landlord told her he wasn’t a conglomerate and needed her rent on time to pay his mortgage payments. So he said to her, “It’s the same as always.”
- Student loans and medical loans often offer adjustments based on ability to pay. Student loans, for example, often adjust payments based on income. Hauer, the financial advisor, says the same goes for medical bills. “Most medical providers allow you to set up a payment plan, and most of them charge no or very little interest,” she says, so don’t put those bills on your credit card, where interest rates are much higher.
For other monthly services and bills
- Many water, electricity, and gas utilities don’t stop service, but make sure you qualify for this program and make sure your service isn’t accidentally disrupted. Also check with your internet and telephone provider.
- Check any recurring fees that you might incur with the automatic payment. Cancel all unnecessary items, including cable TV, music streaming, and other subscriptions.
Courtesy of Seth Franklin
Candace Grenier, a dental hygienist from Anchorage, Alaska, lost her job last month. Both she and her son applied for unemployment benefits but did not receive them. “It was kind of a fight,” she says. The unemployment offices “were so overwhelmed with inquiries because there were so many layoffs,” says Grenier. The long list of services she’s slashed from her budget includes cable television and plowing her snowy driveway.
- Some decisions are particularly difficult. For example, take health insurance if you qualify. “You really have a lot of choices because if you don’t pay for your health insurance and someone gets sick, it can be catastrophic,” says Hauer.
In Orlando, Fla., this is a worry for Andrea Delacruz and her husband, who have both been unemployed for the last month. Her husband lost his job as a bus driver before they were eligible for health insurance benefits. To bridge her gap, her husband is considering driving for Uber or Lyft. His wife fears the family will be exposed to the coronavirus. “I’d rather have no money and I owe a lot of money [and] When it’s all over talk to the people and try to see what they can do [rather] than risking my life,” says Delacruz.
- Buy necessary items first, like groceries and medicines—items that cannot be put off. Try to save money by using credit or borrowed money on these items when you can. “Low-income households tend to have much smaller budgets to begin with and don’t have these utilities that can be cut,” says McBride of Bankrate.com.
- If you need to borrow money, ask family or friends first. If this is not possible and you have good credit, you may also be able to get a personal loan from a bank. These interest rates are about half that of most credit cards.
- Make the minimum payment on the credit card and use it to buy groceries and other necessities.
- Find a free loan advisor. “Not only do they specialize in helping people budget, but they can also interact with your creditors,” says McBride.
For those with retirement accounts, tapping is a last resort, as there are potential tax penalties for doing so. The new CARE Act allows borrowers to avoid penalties for withdrawing money from retirement savings if the money is returned within three years. However, experts say it is a risky option.