Managing Your Finances During COVID-19 Pandemic - Modern Family Law Managing Your Finances During COVID-19 Pandemic - Modern Family Law
Family Law

Managing Your Finances During COVID-19 Pandemic

COVID-19 is scary stuff, especially at a time when pretty much all of our news feels like scary stuff. With a statewide ban on dine-in service at restaurants and bars and the required closure of all non-essential public-facing businesses for an unknown period of time, it’s no wonder some people are in freak-out mode, especially those that live paycheck to paycheck.  By now, you don’t want a reminder of all the types of workers who have had to leave the workforce by being laid off or taking reduced hours and shifts and the soaring unemployment applications.  You or someone you know is in that position. Compounding all this with the closings of schools has caused unplanned stress on families wondering where to find alternative sources of income.

Even our Judicial System has been affected. Court closures all over the State have left people, and families, in a state of complete limbo, with the government updating and extending their closures what seems to be on a daily basis.  This makes it even that much harsher of an emotional struggle for people divorcing, and who have children, as one attempts to trek through the unsolid financial grounds brought about by the COVID-19 pandemic and navigating the current indeterminate state of your court matter.

Although it is always easier said than done, the first thing to do is remain calm and don’t panic. When people panic while stocking up at the store they may buy more than they actually need, in turn compromising your food budget.  This is just one example but is a fundamental part of existence, that with shelter.  Be careful that your food and household goods budget aren’t completely out of control and you come out of this with way more debt than you expected.

Assess Your Spending

Change your budget when your income changes.

A change in income requires a change in spending. Now maybe the time to analyze your spending habits and make some adjustments to your budget.  Keywords are spending habits.

  • Stocking up on supplies can help us prepare our homes for the unexpected, but overbuying will stress your food budget.
  • Don’t spend money on unnecessary things. Prioritize your needs over wants.
  • Cut back on non-essential spending.  Review recent checking account and credit card statements and figure out what you are paying for each month. The cost of subscriptions, magazines, streaming services, gym memberships can add up. If you aren’t using them, now may be the time to cancel and save.
  • Now maybe a good time to cut the cable cord. You may be able to save money each month by switching to one of the streaming entertainment services.
  • Avoid “retail therapy” and shopping online. While it may relieve some of the stress you may be experiencing now, it can leave you with unplanned credit card debt.

Build Your Emergency Savings

Although this is not something new, it is important to have an emergency savings fund set aside to weather unexpected emergencies and avoid falling into debt if you have a disruption in income.  If your emergency savings are not quite where you would like it, don’t panic. Here are some ways to help build it up quickly, even during a pandemic.

  • Expecting a tax refund? Get your taxes filed and plan on adding it to your emergency savings if not needed for your immediate needs.  Make sure you are speaking with a tax professional to maximize your deductions to receive the highest return you are entitled to.
  • Receiving unexpected money? If you receive a bonus, birthday gift or other refunds, be sure to add to your savings.
  • Spending less than normal? Spending less on gas, nails, hair, gym membership or eating out? Simply transfer the amount you would be spending on these things to your emergency savings.
  • Automate your savings. Figure out how much you want to save each week for your emergency fund. You can set up an automatic transfer right from your payroll or checking account to your emergency savings account.

Monitor Your Credit Score

Remember to check your credit score regularly to know where you stand and to keep your score in good shape. There are sites like Credit Karma that help monitor your efforts so you stay informed.

Make Wise Choices

Really look at what you have going on in your life at this time.  Does it make sense to cut back on some or all of our “extras” that we do not need?  Trust me, you can temporarily live without a lot of the things we “believe” we cannot live without.

Included in your analysis of making wise choices, is it a wise choice to release your legal representatives from your case, who has been working with you for a week, a month, a year or longer?  You will no longer have the ability to contact that legal representative for advice or check on your case.  Do you want the added stressors of monitoring the Courts and your case, or would place that burden on your legal representative be better for you?  If you release your legal representative now, you will eventually have the need to hire another one later with an entirely new retainer or struggle through the remainder of your case alone.  How will you handle your legal situation when something urgent happens if you do not have your legal representative readily available to help you?  When assessing what is important to your unique financial situation, your needs to minimize your stressors during this extremely fickle time in our world history, please consider the “no panic” approach and logically assess if keeping your legal representative on your case weighs out more pros than cons. Remember, take 10 deep breathes and exhale fully. Then start assessing.

Do you have a 401K?  Remember, 401K’s are long term savings accounts. Avoid the temptation to dip into these accounts to get by during uncertain financial times, unless absolutely necessary.

Do you own real estate?  Refinance an option to pull equity?  HELOC?  Interest rates are really low right now.  Make sure you are getting the right advice from a trusted financial advisor about the pros and cons of refinancing.  If you decide to make this choice regarding your property, make sure the financial institutions are still accepting applications for your purpose.  Keep the funds in a special account and don’t touch them unless absolutely necessary.  When this pandemic ends and you have most if not all of your funds still available, repay the loan immediately to avoid the temptation of just using it all up.  This will help your credit score when coming out of this global crisis to position yourself the best way possible for future funding.

It’s not completely reconfiguring your finances; it’s figuring out and assessing your current situation and making a decision based on that.

See other COVID related articles here.

Be Safe.

 

 

Posted March 29, 2020


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