Planning cures panic. At least it always made me feel better. Whenever I am struck in the head with anxiety, the first thing I do after taking a few deep breaths is to understand what actions I can take to regain some semblance of control and peace of mind.
We are all trying to control as much as possible during this unprecedented period. If, among other things, you feel nervous because you have recently seen a loss of income or if you fear that this will happen to you soon, here are the steps to follow.
Evaluate your emergency fund
The first step is to determine your essential monthly expenses. I’m talking about the simplest of the nudes: mortgage / rent, public services, Internet, insurance, grocery store. Everything you need to stay in your home, stay fed and stay protected. Once you have calculated this number, multiply it by three. This number is the minimum amount you should keep in savings. Six months of necessary spending would be better, but three is a start and more immediately achievable if you start from scratch.
Follow the remaining steps in order. But first, read the situations below to find out how to approach the steps:
- If you have already lost your income, you should immediately start taking these steps.
- If you still have your income but don’t have three or more months of essential emergency savings as described above, follow these steps to build up your emergency savings as quickly as possible.
- If you still have income and an appropriate amount of emergency savings, take these steps as soon as your income stops so that your emergency savings last as long as possible.
It is obvious, but the fluff must disappear. As Tom Hanks says in Castaway: “So now I know what to do. I have to keep breathing. And tomorrow the sun will rise and who knows what the tide will bring. You don’t need daily fancy coffee drinks or a Peloton membership to keep breathing. Once the tide starts to bring you your paycheck, you can get that stuff back.
Minimize debt payments
Credit card companies are currently very flexible. If you have balances, contact the company and ask them to defer minimum payments and finance charges for a few months. Most are ready to do so.
The new stimulus bill, CARES Act, provided additional relief for student loans. Significant fact: no interest will be charged and all payments will be voluntary until September 2020. In addition, during the period of suspension of payments, individuals do not have to make payments to receive credit Sorry for loans to the public service (PSLF), assuming they meet all the other criteria. At the time of writing, Fedloans has not yet indicated how to do this correctly, but guidance should be provided. If your goal is to get as much forgiveness as possible, it may be helpful to suspend your payments.
Make the minimum payments required for all your other debts, such as car loans and mortgages.
Stop backing up
Put one of your medium and long term savings plans to sleep. Your goal is to add or leave as much money as possible in your emergency savings.
That said, if you still have your income and have already created an appropriate emergency account, I can’t tell you how important it is to keep adding to your long term investment accounts (401k, 403b, IRA) until one of these things changes. Continuing to invest now will significantly improve the achievement of your long-term goals.
Look for other sources of income
Anything you can do to bring in a few extra dollars helps you make arrangements for places that require additional clinicians. telepractice, for example, or just taking little economics jobs outside of your main profession. If this can help expand the use of the emergency fund, it is worth considering.
Use your credit cards
If your emergency fund starts to run out a bit, start mixing up the use of your credit cards. In the long run, no one wants credit card debt, but it can help you get through significant short-term difficulties. You can get over it.
Take loans / withdrawals from retirement accounts
This is the last resort because it is likely to have the most lasting negative impact on your finances. Don’t make the mistake of going too early. However, if you’ve used all of your other savings and used your full limit on credit cards, this is probably one of the few areas in which you’ll need to turn.
New uncertainty is one of the most difficult things to deal with emotionally. We don’t know when it will end, but it will end. Give yourself the opportunity to wait.
This information is provided for general purposes and is subject to change without notice. Every effort has been made to compile this material from reliable sources.
Jacob W. Parish, a certified financial planner ™ professional, aims to help audiologists, speech-language pathologists and other young health professionals manage financial planning problems. Visit his website, NextGen schooner or follow @SLP_Finance. Securities and advisory services offered by Geneos Wealth Management, Inc. FINRA / SIPC member