7 Ways to Bolster Your Finances in Troubling Times

How can you shore up your finances in today’s uncertain world? Here are some ideas. If you have any questions or would like to discuss your portfolio, feel free to sign up for a free consultation. You may find you’re in a much better position than you realized.

1. Keep enough cash in reserve. For working families, we suggest an emergency reserve of at least three to six months of spending. If you’re retired, or near retirement, we suggest you keep a reserve equal to two years spending in a combination of cash and short-term high-quality bonds.

2. Keep saving / start saving. Lockdowns forced much normal spending to be curtailed. As the economy reopens, be intentional about beginning to spend again. What did you most miss during lockdown? What can you easily live without? Commit to maximizing the value of every dollar you spend.

3. Do you have a mortgage? If so, record low rates could save you hundreds of dollars every month. Review the numbers and determine if refinancing makes sense. If it does, don’t delay. As panic recedes and the flight to safety reverses, interest rates on Treasury bonds are beginning to move higher again.

4. Are you making monthly payments on federally backed student loans? Through September 30, 2020, payments for student loans owed to the federal government are suspended and the interest rate is zero. Deferment of payments could allow you to build up your savings. While continuing to make payments could help you to pay off your loans sooner, those anticipating Public Sector Loan Forgiveness (PSLF) should avoid making any payments. You’ll accrue months toward forgiveness even without payments. No action on your part is required to defer loan payments. If someone contacts you about stopping payments, hang up or delete the email—it’s a scam.

5. Consider college refunds and your 529 plan. With lockdowns, dorm closures, cancelled meal plans, and online learning, you may be due a refund from your child’s college. If you paid tuition and fees from a 529 plan, and you deposit a refund check to your own account, the refund will be treated as a taxable distribution and tagged with a 10% penalty. To avoid this tax, you can redeposit your refund to the same 529 plan you paid from. Even simpler, leave the money with the institution and apply it to next semester’s tuition. The usual 60-day period to redeposit 529 funds without liability has been extended. If the 60-day period ends on or after April 1, 2020 and before July 15, 2020, the redeposit can be made any time before July 15, 2020 or 60 days after the refund date, whichever is later.

6. Do you need financial assistance? Contrary to popular opinion, banks prefer not to get tough with borrowers. A bank’s business model is based on repayment of loans, not foreclosures. In today’s environment, many banks are willing to work with you, but you must reach out to them. The same holds true for utilities and other monthly services.

7. Mortgage forbearance programs may be available for those who have lost jobs due to the pandemic. Be sure terms being offered are reasonable. Again, reach out for assistance. Simply stopping payments will quickly get you into trouble.

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