Economic Impact of COVID-19: 3 Next Steps For Those Struggling Financially
It's not an understatement to acknowledge the immense impact that the Coronavirus has had on our physical well-being, as well as the economic health of individuals and families across the country and planet. Businesses are being forced to cease operation, leaving people worldwide jobless at record- previously inconceivable- rates. Roughly 22 million Americans filed unemployment claims over a four-week period starting March 14 - marking a record-breaking high for the U.S. Department of Labor.1 And claims only continue to climb each week. These unprecedented numbers serve as a sign of the times, as everyone everywhere struggles to make ends meet amidst this global pandemic. No one knows what will happen then the Payroll Protection Program (PPP) ends- there are only bad (more money printing) and worse (no money printing) outcomes.
For those struggling financially, and even those not yet strained, the immediate question becomes - What should we be doing now to begin recovering from this?
I'm proposing three critical next steps for anyone who is adversely impacted by the first-hand economic effects of the COVID-19 pandemic. Some of these might seem obvious, but most would admit that there is always room for improvement:
Step #1: Reevaluate Your Spending
Whether you’ve experienced a sudden stop in income altogether, a decrease in your paycheck or you’re now reliant on financial assistance from the government, any change in your normal cash flow is cause for a reevaluation of your spending. If you're fortunate enough to not be impacted yet, it doesn't take much imagination to envision how you might be if we fail to contain this virus and the economic fallout.
While spending may sound like an obvious area of focus, it’s one that should be done immediately and with care. I suspect most of us have not taken out the credit card statement and gone through it with a fine-tuned combed as well as we should. My experience suggests that many are tempted to but even more concerned about what they might find. If you already have a weekly or monthly budget in place, congrats! Nine out of ten people tell me they do, but I know the true number is just the opposite. If you are that 'nerd' who maintains a monthly budget, have you segregated what are non-essential costs and could be eliminated? Have you prioritized them in order of importance?
As you’re doing this, it’s important to remember: businesses you typically frequent may not be operating anyway. I'm referring to gyms, wine clubs, country clubs and the like. If you normally budget for a night at the movies every month, weekly dinners out, etc., consider reallocating this “fun money” to cover more essential expenses. Or, you could use it to start or contribute to an emergency fund. If you're saving with me but absolutely looking at missing a credit card or mortgage payment, then it's okay to pause funding your future to address the immediate. One strategy I recommend is categorizing your expenses into a "1" (fixed, like electricity and water), "2" (credit cards and cable TV) and a 3 (mobile phone data and streaming television). It's unlikely that you'll ever need to seriously consider a 1 or 2, but that doesn't diminish the value of the exercise.
Step #2: Acknowledge the Change
This is an unprecedented time, and it’s affected the lives of nearly everyone across the globe. People in a wide variety of industries - hospitality, retail, food, travel and more - have been left jobless for the foreseeable future. On top of this immense stressor, we’re all fighting the spread of a deadly virus.
If this has made you stressed, angry, sad, devastated - it’s okay. You’re human, and your reaction is justified. But when it comes to standing tall and moving forward financially, the sooner you can recognize the emotional toll these global events have had and come to terms with the “new normal,” the sooner you can begin planning ahead. Repressing your emotions or denying the true reality of the situation will likely set you up for a fall eventually. And failing to view your circumstances accurately prevents you from formulating the best plan of action to conquer the obstacles in front of you.
An important part of this acceptance is recognizing any bad habits you might have, specifically financial spending habits triggered by stress. Maybe you’re someone who likes “taking the edge off” with online shopping or use eating out as a way to cheer yourself up. Whatever it may be, now’s the time to practice restraint and remember that these are emotional responses to what’s happening around you. That money may be better spent elsewhere (or tucked away in a savings account). Sometimes, good times and ultra-convenience are crutches that keep us from moving forward on what we know is necessary. So often in America, we need to suffer the consequences of our behaviors (with our health or money) to finally find the impetus to move off the fence and forward in our lives.
While it's easier said than done, it's usually true that the challenges and tragedies are what define us and in retrospect often force positive 'pivots' that may never have occurred. Maintaining an attitude of gratitude for what we do have, and asking how our present situation could provide the basis of a major breakthrough in our lives, expands our paradigm and opens doors we didn't even know existed pre-crisis. I always say, 'Hollywood never made a movie about a guy who just puttered through his life without a challenge." And if they did, no one would want to watch it. Maybe the COVID crisis of 2020 is the defining moment of our generation and our life. If it was, what would be the next scene?
Step #3: Be Aware of Changing Policies
Governing bodies and private companies alike are working to accommodate out-of-work citizens. Both the United States and Canada have passed legislation in an effort to amp up benefits for unemployed individuals, and even local governments are attempting to offer relief as well. For example, some local governments have made it illegal for power and utilities to be shut off due to a missed payment during the pandemic. Others have urged landlords to halt rent payments temporarily. Indeed, extreme situations call for extreme measures and say what you want, but our leaders have not been timid about offering solutions (their efficacy is another matter!)
Even some insurance agencies and gyms have paused memberships or reduced rates in an effort to accommodate out-of-work individuals. Write down every monthly bill you owe, and begin contacting those companies or agencies immediately. They may not have a forgiveness policy listed on their website, but they may be willing to assist you if you explain your situation - especially since so many people are in a similar spot. In modern America, so much corporate chicanery involves people being too lazy, distracted or timid to ask. But as they say in the sales business, "if you don's ask, you don't get." It's easy to fall into these mindsets, are there any you hold that, if viewed from a third-party perspective, would look silly?
Feeling uncertain about the future ahead has become the new normal amidst the COVID-19 pandemic. It is literally the defining theme of our current environment. And when we become uncertain, we often become paralyzed. And we're paralyzed, we're exploited by other or worse- we exploited by our fears and weaknesses. If you’re struggling financially, you are not alone. There are resources available to you now, such as stimulus checks and unemployment insurance, to help make this time a little easier. If you’re still worried about what comes next, speak to your financial advisor immediately. Together, you can work on developing a solid plan for moving forward.
When you tell the story of COVID 19 twenty years from now, will you be the hero or the victim? Will you regret the risks you took, or the ones you never even considered? We know the answer.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.