We got a note from a subscriber asking if I could provide some ideas on how to find sources of cash during this crisis. I fully understand this question. Many families are experiencing the loss of their jobs, have been living paycheck to paycheck, and are facing the reality of running out of cash. Many are waiting for the federal stimulus payments to be received or their unemployment benefits to kick-in (if they have been able to overcome the hurdles to file a claim). Overall, cash is more important than ever.
Here are 10 ideas that might help the situation:
Make an inventory of all sources of cash available to you to withdraw or borrow from your checking account, savings account, home equity line of credit, 401k plan, cash value life insurance and retirement plan assets. Under the recently passed CARES Act there is a provision has been made that allow you to borrow up to $100,000 (less any outstanding loans) from your 401k plan until September 23 if you qualify. I don’t normally believe in accessing retirement funds for current needs but this is an emergency situation that no one anticipated. Be careful with any such withdrawals or loans and fully understand any penalties or income taxes you may owe.
If you have been laid off, look to collect all remaining work benefits available to you. This includes unpaid vacation, sick leave and health insurance benefits, including available COBRA benefits.
Inventory all your bills due over the next four months. Yes, I think this situation is not going to be reasonably resolved until at least September 2020. In this inventory list all debts – mortgages, student loans, car loans, personal loans, rent, and medical bills due. Then list out your basic living costs – including food, health insurance, utilities, and medical costs. This exercise should give you a clear understanding of the minimum cash you need to pay your basic living costs and what cash you have left over for debt service. Call all your lenders and ask if they are offering any special programs for people impacted by the pandemic. These plans could include deferring payments, forbearance, or payment reductions by agreeing on a new payment plan. Congress and state legislatures have put in place special provisions for federally insured mortgages, federal student loans and other types of debt. You may be able to substantially reduce your debt service needs by making these calls. Before you agree to anything be sure to fully read and understand the terms being offered by the lenders. Look out for unnecessary fees and costs.
Inventory available credit from credit cards that you can access. While this is probably your highest interest debt the cash received can really help get you through this tough time.
Consider only paying the minimum amounts due on credit cards to conserve cash. I know I have told you to avoid credit card debt but in this case paying only the minimum until you regain your financial footing is acceptable.
Call your utility companies. As we have seen, many utilities (e.g., water, electric, Internet or phone) are offering special payment plans or terms for qualifying consumers and not shutting off service. Again be proactive, call them to see if you qualify for these programs and ensure your service isn't shut off.
Review all recurring charges you might have on auto-pay. Cancel all unnecessary items, which might include streaming services and other subscriptions.
Be sure to keep your health insurance active. If you have lost your job, you will be eligible for COBRA benefits, have access to Affordable Care Act plans or qualify for Medicaid depending on the state in which you live. You must have health coverage in place during these times. Work to find the lowest cost coverage that you can keep in place.
Make mindful spending decisions. These include only buying the necessary items first, like food and medicine — items that cannot be delayed. Stick to the basics and don’t splurge on items that you don’t really need.
After carefully considering all options, if you find yourself short of cash, as a last resort, borrow money from family or friends first. If that's not an option and you have good credit scores, you might also be eligible for a personal loan from a bank. Those interest rates are about much lower most credit cards.
These are crazy times. The whole US economy has taken a significant negative hit. Family cash budgets have been hit as well. You need to become more familiar with your money than ever before and plan your cash needs very carefully.
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