When the coronavirus outbreak started to hit Americans’ wallets earlier this year, lawmakers got busy. They gave out stimulus checks, offered special forbearance policies and even approved an extra $600 per week in unemployment benefits.
At the time, the hurdle was getting those initiatives off the ground. The end dates seemed like a future problem; deadlines were something to be dealt with in the summer. Surely things would be back to normal by then.
Now — you guessed it — all those sunset dates are here. But the crisis is far from over, and the need is far from gone. Instead, the U.S. is sitting on the edge of what economists are calling “the cliff“: a sudden drop-off in the support that millions have come to rely on.
The government is still figuring out whether it’ll issue a second round of stimulus checks, who will get them and how much they’ll be… but Congress is set to recess next week. The Federal Pandemic Unemployment Compensation (FPUC) program providing the $600 payments ends Friday, July 31 (though most states have already paid out the last round of bonus checks). Federal eviction protection ended July 25.
The good news is that at least you know the cliff is coming, which means you can prepare. Whether you’re going to be directly affected by the disappearance of relief money or you’re just trying to be proactive in figuring out your finances, here’s how experts say you can ride out the fall.
Chris Manske, a certified financial planner and author of The Prepared Investor, says to reduce your spending ASAP. You’ve probably already cut back in some areas, either because lockdowns canceled your summer vacation or the recession has forced you to slash your Starbucks budget. With the extra $600 weekly FPUC payments ending, you should take cost-cutting to the next level.
“Let’s tighten up a little more,” Manske says. “There’s something you can do right now to try to make the current checks last into August and give you a little more runway to land this plane well.”
The key to this is adjusting how you spend your money, not necessarily what you spend it on. Manske recommends choosing a day of the week and promising yourself you won’t spend a single cent on that day.
“The mindset is, ‘I’m not taking anything away from myself, I’m just saying I can’t do it right now,'” he says. “The next thing you know, it becomes easier to say no, easier to make good choices, when there is a temptation to spend money.”
We’re not just talking about Amazon Prime impulse buys. Ramona Ortega, CEO and founder of My Money My Future, suggests you reduce your essential expenses, as well. Find places where you can lower fixed costs. Can you sell your car? Can you relocate from the city to the suburbs? Can you move in with your parents?
Take stock of your options
Some 40% of Americans say they’d scramble to cover an unexpected $400 expense. If you’re one of the lucky ones with emergency savings, use them — and anything else you have stashed away. This counts as an emergency.
“What we’re looking at is a cash crunch,” Ortega says. “Make sure you are accessing all the capital, all of your cash, you can.”
Be careful when borrowing money, too, says Scott Kahan, CFP and chair at the Foundation for Financial Planning. Scrutinize the terms of your various credit cards; that way, if you do have to carry a balance, you know you’re putting it on the card with the lowest interest rate. If you’re a homeowner, look into applying for a home equity line of credit, or HELOC.
“We never like to see people building up debt in a trying time, but the reality is you’ve got to pay the bills,” says Kahan, also president of the Financial Asset Management Corporation.
A caveat is that, if possible, you should refrain from tapping into your 401(k) or other retirement accounts. Even though the CARES Act waived the penalty on early withdrawals, you’ll still have to pay taxes on them. Kahan says this amounts to sacrificing your retirement for your current lifestyle — not a great choice if you can afford to avoid it.
Leverage your network
Out of work? Get to work.
Manske recommends telling your friends, family and former coworkers that you’re searching for any and every viable source of income. Post on social media. Browse classified ads. Comb sites like LinkedIn.
“Don’t be bashful about saying, ‘Hey, I am furious about finding work before the end of July,'” Manske adds.
If a full-time position in your desired field isn’t viable right now, Ortega recommends hunting for part-time jobs, side hustles and freelance projects. Explore new, coronavirus-specific jobs like contact tracing or check out gig economy opportunities like delivering for Uber Eats.
You may also want to reach out to previous employers and ask if they need any work done. After all, your foot is already in the metaphorical door.
“You’ve got to be able to use your network right now, because that’s really how you’re going to tap into new income,” Ortega says.
Consider your next steps
As frustrating as this period of financial struggle may be, it’s also a chance for you to reset the way you think about your money and career.
Start by looking critically at your finances and reviewing best practices.
“It all comes back to basics, the fundamentals of anybody’s financial life,” Kahan says. “What do I have coming in? What do I have going out? I can’t always control the income, but I can control — to some degree — my outflows.”
As far as jobs go, Ortega says you might want to learn a new skill that’ll help you land a gig in a better-paying, more stable industry. For example, while service jobs may never bounce back, tech might be relatively resilient.
To that end, she says to check into getting trained through a program where you receive a stipend or don’t have to pay upfront. The Make School, which provides degrees in computer science, has a financial aid model that will tie loan payments to your income level. The Grace Hopper Program requires a $3,000 deposit but defers tuition until after you’ve graduated and landed a job in software engineering.
The goal is to set yourself up for the inevitable next crisis.
“There’s no better time than now to start planning for the future, because something like this will happen again,” Ortega says.
Ask for help
It’s natural to want to feel independent when it comes to finances, but if you’ve done all of this and you still find yourself suffering, it may be time to ask for help.
It’s not hard to find free, legitimate assistance online. The Financial Planning Association has a list of pro bono financial planners willing to provide “short-term, no-strings-attached” guidance on its website. The XY Planning Network and National Foundation for Credit Counseling can connect you with free, personalized help, as well.
There’s no judgment about taking advantage of these consultations — as Kahan puts it, “We understand that now is the toughest time.”
On that note, if you have a more specific need like groceries or rent assistance, consider contacting a local community group or nonprofit. Manske says you may opt to offer your time or services in exchange for a handout, but typically “they want to give to you to help you get back on your feet.”
This goes for family and friends, too. Since the pandemic is a global issue, people are generally being pretty understanding right now.
“It can be embarrassing to have that conversation, but it’s a real powerful way to make sure you successfully get through — and over — that cliff,” Manske says.