- Budgeting, Saving Money, Savings
- May 18, 2020
- FCU Team
When the President declared COVID-19 a national emergency in early 2020, few people knew just how much life would change in the months that followed. While we are all making sacrifices during these tough times to help flatten the curve of coronavirus cases, the federal government continues to roll out relief programs in hopes of steering clear of an economic recession. But what do these programs mean for your family?
Here is a guide to managing your money during uncertain times.
Protect Your Personal Information
Unfortunately, not everyone is doing their part to protect the health and welfare of others during the coronavirus outbreak, so you should keep an eye out for a wide range of scams both online and offline.
Phishing emails posing as financial institutions have been on the rise during the COVID-19 lock-down.
A phishing email is an email that appears to be from a company you know or trust like your credit card company or a social media site. Scammers send these messages to try to trick you into providing them with your passwords, account numbers, or social security information. Your should never send money to a charity you don't recognize or click links in an email asking for financial information unless you verify the sender.
With federal relief programs like stimulus checks in the mail, scammers are updating their strategies to pretend they have information on your direct deposit or check payment. According to the FBI's Internet Crime Complaint Center, people lost $57 million to phishing scandals in just one year.
It's easy to fall victim to scams when the sender's name matches that of your bank or credit card company, but here are a few foolproof ways to detect phishing emails during COVID-19:
- Checking the email address of the sender
- Misspelled words and poor grammar
- Distorted looking company logos
- The email contains urgent requests for account information
- The email offers coupons or promotions that sound too good to be true
- The email warns you about suspicious activity on your account, but you haven't received a phone call
- The email claims to be from the federal government
These are just a few ways to determine whether an email may be a phishing scam. As a rule of thumb, never log in to one of your financial accounts using an email link. Most financial institutions won't ask you for sensitive information like account numbers and passwords via email or text. If you suspect you're getting a phishing email, call the company listed on the email for more information.
Protect Your Income during COVID-19
The first round of stimulus checks available under the CARES Act, was mailed in early April offering up to $1,200 per taxpayer.
The amount you receive as a stimulus payment varies based on your adjusted gross income. If you have children, the check includes $500 per child. You can expect to receive your check payment in the mail if you don't have direct deposit information on file with the IRS. The IRS is now offering an economic impact payment portal to help Americans track whether or not their checks have been mailed. To reduce fraud, you'll also receive a written letter from the IRS once your check has been mailed.
Paycheck Protection Program
The CARES Act includes a Paycheck Protection Program (PPP) that covers small businesses, self-employed people and independent contractors. If you're one of the millions of Americans who can't return to work because of the COVID-19 lock-down, you might be eligible for a forgivable loan to continue paying yourself for the next two years.
The first round of funding ran out in early April, but a new bill was signed releasing an additional $320 billion to the Paycheck Protection Program. To qualify for the program, you must be self-employed, an independent contractor, or a small business owner. PPP loans are calculated based on your payroll income from the past 18 months. Lenders multiply this number by 2.5 to determine your loan amount.
Funds can be used to cover business expenses, but at least 75 percent of the money should go towards paying yourself and your employees a salary if you want the loan to be forgivable. A forgivable loan means that part or all of the loan doesn't have to be repaid at the end of the loan term.
The loan term for PPP loans is 2 years. At the end of the 2-year period, you'll need to apply for loan forgiveness with your lender.
If you have the right documentation to prove you met the requirements of the program, the loan is forgiven. The federal government requires that lenders provide borrowers with a forgiveness decision within 60 days.
If you've been laid off because of the coronavirus pandemic, you are eligible for increased unemployment payments under the CARES Act. Through the CARES Act, unemployed people get an extended unemployment period of 13 weeks plus an additional $600 per week. The base amount of your unemployment payments is based on how long you worked in the past 18 months and how much you earned on your last job.
Protect Your Money
Whether you get a federal relief loan or the maximum stimulus check payment available, it's important to manage your money wisely during the coronavirus quarantine.
What can you do with the surplus of income you receive from the federal government? Here are a few smart ways to spend your stimulus checks.
Catch Up on Bills
The first thing you want to ensure your family maintains during the pandemic is access to all the necessary utilities. While there is a moratorium on foreclosures due to COVID-19, not every municipality will keep your utilities on if you can't make payments.
Use your stimulus check to make sure you are caught up on all essential bill payments. If the check payment won't cover your monthly expenses, contact creditors right away. Many lenders and creditors have set up programs to help people navigate the sudden loss of income. Take advantage of these programs to delay as many bills as you can if you have no income.
If you are still working, make as many payments as you can on time. Not every loan forbearance program comes without penalty.
Interest commonly accrues during a forbearance period which can lead to a much higher principal balance on a loan. At the end of the forbearance period, some lenders require you to pay the entire past due balance that you missed during the forbearance. Make it a goal to catch up on all the bill payments you can with your federal stimulus check.
Start Your Emergency Savings
Many people learned the value of emergency savings during coronavirus lock-down. Most financial experts recommend having 6 months of emergency savings in an FDIC insured account. If you're self-employed or a business owner, your emergency savings should last at least 12 months.
If your income hasn't changed since the start of the pandemic, now is a great time to practice saving 10 percent of your income away where you don't have easy access to it.
Set up an automatic electronic transfer to contribute to your savings account every pay period. The federal stimulus money you receive could give you a much-needed head start on preparing your emergency savings.
Consider a savings account that earns interest as a secure place to deposit your money. As long as fees are low, your balance will accumulate over time putting more money in your pocket.
Pay Down Debt
If you already have emergency savings and your bills are caught up, consider paying down debt with your stimulus check payment. Credit card debt is one of the most common causes of financial setbacks during tough times.
Pay your credit card balances in full before the end of each billing cycle whenever you can. During a financial crisis, many people won't be able to pay large balances off, but you can whittle it down by making more than the minimum payment.
Free up extra money in your household budget by cutting back on wants and spending only on what your family needs. Use this time to reduce your expenses and put the money you save toward your debt. Variable interest rates on credit cards can fluctuate at any time leaving you with higher than normal monthly payments.
Use the snowball method to get your debts repaid sooner. This means paying off your debts by size instead of by interest rate.
The goal of this method is to gain momentum in debt repayment to keep yourself motivated. While you're repaying your smallest bill, pay the minimum on all other accounts if you can.
Once the first debt is repaid, take the same amount you paid on that balance and use it plus the minimum to repay the next smallest balance. By the time you get to the largest debt, you'll be making a much larger payment on your last debt which means paying it off faster. Once you take control of your debt, you can weather a financial crisis more easily.
Protect Your Family
The health and safety of your family are of the utmost importance during the human coronavirus pandemic. But protecting your family doesn't need to include panic purchasing.
Stores will occasionally run out of things like surgical masks and hand sanitizer, but you should find ways to weather the shortages. Stocking up on supplies you don't need right away could lead to increased credit card debt and unaffordable monthly payments.
The best way to provide for your family is to focus on the essentials that fit within your family budget. Panic purchases aren't just bad for your wallet.
Here are two ways irrational stockpiling affect the safety of your family during the COVID-19 pandemic:
Increased Exposure to the Virus
Navigating barren grocery store shelves from store to store makes shopping trips longer. If you're expecting to go out for a quick grocery store run, but spend two hours looking through stores, you're increasing your exposure to the virus.
Even if you don't bring your spouse or children with you, you run the risk of bringing home pathogens that can get everyone else sick.
If possible, use a grocery delivery service where you can schedule the items you need. Grocery delivery apps help you manage your budget much easier since you can see how much you're spending and make changes to your order without feeling the need to rush and avoid exposure.
Take your time with your grocery bill to sort through which items you can live without and which you really need to make it through the crisis.
There's no simple solution to getting through a pandemic. Cut back on information sources that leave you feeling anxious. When your anxiety levels rise, you're more likely to make emotional decisions about money which can lead to overspending.
FCU is Here for You
No one has been immune to the effects of this pandemic but we want to assure you that Florida Credit Union is here for you, for businesses, for teachers, and more. Keep up to date with our efforts during the pandemic by visiting our COVID-19 update center.
Florida Credit Union is a full-service financial institution. Founded in 1954 as the Alachua County Teachers Credit Union, FCU now services over 100,000 consumer and business members in 45 counties throughout North and Central Florida. For more information about the services we provide, visit FLCU.org or call us at 1-800-284-1144