Merely saying that things are difficult right now feels like a massive understatement but there are some hard-yet-necessary things you can do right now if you’re facing a reduced income.
Create a budget
The first thing I recommend is to get a tight grip on your spending and create a realistic budget.
I’ve found that when people really start paying attention to precisely where money is going, it becomes much easier to slash expenses and save.
Explore CARES Act options
The CARES Act offers several provisions, including mortgage forbearance for up to 360 days and, as a last resort, penalty-free withdrawals from your tax-deferred retirement accounts (such as a 401(k) or IRA) of up to $100,000. You have until the end of 2020 to do this.
I strongly encourage you to think very carefully before tapping into your retirement savings. While, thankfully, you won’t get hit with the usual 10% penalty for taking a withdrawal before age 59½, you will still eventually have to pay taxes on any withdrawals (the upside is that you’ll have three years to do it).
For homeowners, right now might be the ideal time to refinance your mortgage to a lower interest rate. The key is to reduce monthly outflow and conserve cash, even if it means refinancing to a 20 or 30-year loan.
While you have a lot of decisions to make, it’s imperative that you make the absolute best choices for your unique situation. Because some of these approaches are complex, if you aren’t already, procuring the help of a fiduciary advisor, is something you should consider.
Lastly, keep yourself protected for the future. While you need to cut expenses, you also need to make certain they are the right expenses. I’m referring to things like insurance coverage. Try not to let any key coverage slide or, I’m sorry to say, you run the risk of making a bad situation even worse.
Unfortunately, this is high-stakes financial chess, and the decisions you make right now will have long-lasting implications.
Know your options and continue to do your best to stay on course.
We will get through this.