Personal finance: How to manage money during the pandemic | Managing Your Finances During a Pandemic

Personal finance: How to manage money during the pandemic | Managing Your Finances During a Pandemic.

Times of crisis can bring uncertainty for many reasons, and the current coronavirus pandemic is no exception.

Whether you have experienced a change in your financial situation because of layoffs, reduced hours or wages or through increased medical expenses, it is important to take stock of where you are and make a plan to ensure financial success now and in the future.

Many organizations are offering support to those impacted by the coronavirus. Knowing where to go for help, what to ask, and how to document your situation is key to successfully managing your finances and recovering once the crisis is over.

Steps to help you manage your money during and after a pandemic.

1. Analyze Available Resources.

If there is one upside to the current situation, it’s that many programs are being offered to help consumers stay healthy, both physically and financially. Identify all available resources and take advantage of those that fit your needs. Beyond any savings you may have put aside for emergencies, community resources, like the ones below, could help you bridge a temporary income gap:

Military relief societies are offering grants or zero-interest loans for service members affected by coronavirus. Contact Army Emergency Relief, Air Force Aid Society, Navy-Marine Corps Relief Society, or Coast Guard Mutual Assistance for more information.
Depending on your situation, you may qualify for unemployment benefits. Check with the Department of Labor in your state for eligibility criteria.
Many banks and financial institutions are offering to help consumers impacted by the coronavirus. Contact your individual lenders to find out what is available to you.
Many school districts are providing free meals for children at school pick-up locations or bus stops. Contact your local school to find out whether this is an option where you live.
National and local service providers have a variety of assistance options, from payment plans to free services. Visit 211 from United Way and scroll down for available resources.

2. Create a Priority-Based Spending Plan.

Once you’ve identified resources you qualify for, evaluate your budget and create a priority-based spending plan. Consider all sources of available income and make a realistic list of your expected monthly expenses, prioritizing the "must-haves."

These are things like rent or mortgage, food, utilities, insurance, transportation and medication. Then, do the math. If your adjusted income adds up to less than your total monthly expenses, anything that is not a priority item will need to be deferred as much as possible until the crisis is over and your financial situation changes.

3. Contact Your Creditors.

If you cannot meet all of your financial obligations, contact your creditors to ask for assistance. Some programs are already in place to help stop evictions and foreclosures, so whether you are a renter or homeowner, contact your landlord or mortgage servicer right away to ask for help.

The same goes for providers of automobile, student and personal loans, including credit cards. Creditors might offer reduced payments and fees, deferred payments through forbearance, or other hardship plans.

When you talk with your creditors, be sure to take notes. Write down.

The date and time of your call.
The name of the representative you spoke with.
What you were offered.
How information will be reported to the credit bureaus.
The plan you ultimately agreed on.

Once you agree on a plan, put together a letter summarizing your discussion and mail it to the creditor. Then, monitor your monthly statements to be sure you are receiving the assistance you discussed.

4. Recover Strong.

Although it is difficult to think about future emergencies when you are in the middle of a crisis, consider making a financial recovery plan for once things get back to normal so that you are prepared to handle the next emergency that may arise.

Once you are back on your feet, revisit your monthly budget and commit to regular savings to build or rebuild your emergency fund. Start gradually and set a goal to save $1,000, then keep saving until you have three months of your living expenses put away to handle future emergencies.

If you have debt, consider implementing a rapid repayment plan to pay it down or consider talking with a credit counselor to see if a debt management plan is right for you.

And please remember, these are unprecedented times, and although you may feel alone, everyone is affected by the current pandemic. Take steps to safeguard your physical, emotional, and financial health, and reach out if you need assistance.



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July 16, 2020

Ray Dalio: 3 pieces of advice for how to manage your savings in a coronavirus recession

Ray Dalio: 3 pieces of advice for how to manage your savings in a coronavirus recession.

By Tom Huddleston Jr.

Though the stock market is on the rebound of late as more and more states reopen, hedge fund billionaire Ray Dalio has made it clear that he expects the ongoing coronavirus pandemic to leave behind an economic downturn that could be the worst since the Great Depression.

“We’re not going to go back to normal” once the pandemic subsides, Dalio previously told CNBC Make It, arguing against the idea of a “v-shaped recovery” where the economy would rebound quickly once the country fully reopens.

“Think of the virus as like a tsunami that comes in,” Dalio said. “And if it goes away completely and we never see it again, it still will produce damage, the financial damage ... incomes that are lost, balance sheets that are hurt, restructurings that need to take place. So that will impede the recovery.”

With that in mind, Dalio has advice for Americans worrying about whether or not their savings will keep them afloat should the economy truly take a historic turn for the worse that lasts well beyond 2020.

Though 21% of Americans do not save any of their annual income, according to a 2019 Bankrate survey, for those who do, Dalio offers up three pieces of advice on relatively safe investment strategies to carry you through.

Determine how far your savings will go
First, you need to take a hard look at your savings and calculate how much you need to be “safe and free,” Dalio says.

″[Determine] how many months or years can you get by” based on your current savings and what it would take to ensure you can still have the type of life you’re comfortable leading, he says.

In other words, you should calculate your average, basic expenses — from rent or mortgage payments to food costs and other essential bills that cannot be trimmed or cut out completely — in order to figure out how much money you would need to survive losing a major source of income.

Dalio suggests saving enough to make sure “you’re okay for ‘X’ amount of time,” he says, whether that’s several months, or even a year.

Remember, “you don’t have to have a world of luxury to cover the basics,” he says.

And “when you’ve [calculated] that savings ... cut it in half, just to be conservative,” Dalio says. “Because between taxes, inflation and possible losses in your portfolio, maybe they can add up to half.”

“That’s No. 1. Do those calculations so that you know, if everything is bad, you and your family [are] still good,” Dalio says.

Once you have that amount of your portfolio set aside to feel safe, Dalio says you can start planning how to put the rest of your money to work for you by investing any money that is not part of what you’ve set aside from your expenses.

“I want you to visualize your acceptable worst case scenario and secure that, because once you do, everything else changes and you can have peace of mind that you can take more risk,” Dalio says. “But if you haven’t secured that acceptable picture, you have to make doing that your top priority.”

Diversify your investments
Which brings on Dalio’s second piece of money advice, which is to take the money that you feel comfortable building on and “diversify that portfolio well.” That means spreading your money across different asset classes that can typically be counted on to perform relatively well no matter the economic environment.

“You need to diversify by holding assets that will do well in either a rising or a falling growth environment, or a rising or falling inflation environment, and [you] should diversify by holding international as well as domestic asset classes,” Dalio says.

For instance, the billionaire has been adamant that investors should back “both horses in the race” in terms of the U.S.-China trade war and the two superpowers’ increasing competition for economic growth in recent years.

“I believe Chinese businesses are competitors of American businesses or other business around the world, and that therefore you want to be, if you’re diversified, having bets on both horses in the race,” Dalio said in 2019.

Dalio has also argued against holding onto cash or government bonds at the moment, due to fears that currency inflation could hurt their value over time. “Cash is not going to be a good investment,” he says, adding: “In relation to inflation, it’ll probably lose 2% a year and maybe more.”

Dalio does see gold as a more attractive asset, he says, echoing his sentiments from January, when he said: “I think you have to have a little bit of gold in your portfolio.” Many investors, including billionaire Warren Buffett, tend to look at gold as a relatively safe and steady investment in times of crisis.

Don’t try to time the market
Lastly, Dalio says never try to time the market.

That is “going to be really important.”

In the past, Dalio has said that the “biggest mistake that most people make is to judge what will be good by what has been good lately” in terms of looking at how the stock market has performed recently and when is the best time to buy.

Trying to perfectly time the market is something that even professionals can’t always manage, and the average person will find it extremely difficult to do successfully, Dalio says.

“To do that well you have to beat the pros, who themselves typically can’t do that well.”

Instead, it’s probably a better idea for non-professional investors to take long-term positions in a diversified portfolio that can pay off over time. Otherwise, all investors need to keep in mind the historical cycles and patterns of the economy and stock market.

From bubbles leading into busts, and vice versa, Dalio has always been adamant that those economic cycles tend to repeat themselves and that investors need to learn to avoid thinking along the lines of: ”‘That’s a bad market, and I don’t want any of it,’” Dalio previously told CNBC Make It. That’s because a bear market might actually be the best time to get bargain prices on certain stocks.

After all, a company like Amazon once saw its stock price lost most of its value after the tech bubble burst in the early 2000s, but many of the company’s long-term investors (those who held onto the stock through rough times, or bought it at a nadir) have seen huge gains because they ignored the most recent market trends at the time and took a long-term approach that’s paid off as Amazon is now worth several times what it was even just a decade ago.

August 11, 2020