5 critical action steps every first-time homebuyer must know
arrow
David Bach’s
arrow First-Time Homebuyer Challenge
Get Access Now Learn More

Many companies featured on Money advertise with us. Opinions are our own, but compensation and
in-depth research determine where and how companies may appear. Learn more about how we make money.

Advertiser Disclosure

The purpose of this disclosure is to explain how we make money without charging you for our content.

Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

Earning your trust is essential to our success, and we believe transparency is critical to creating that trust. To that end, you should know that many or all of the companies featured here are partners who advertise with us.

Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

To find out more about our editorial process and how we make money, click here.

By Ingrid Case
April 8, 2020
Rangely Garcia / Money

When you lose a job, the bills don’t vanish along with your income. If you’re one of the 7.1 million Americans who are out of work during the COVID-19 pandemic, you still need to provide the essentials for yourself and your family.

That may mean taking special steps to fix your budget, including cutting back on expenses and looking for extra sources of income. But, say financial planners, your goal should be to get through the rough patch without compromising your long-term financial security.

Here’s what to do first — and what you should only do as a last resort.

Apply for unemployment

Before you tap any assets, apply for unemployment, says William Hatton, a financial planner in Sherman Oaks, Calif. In many states, the CARES act—which helps people who have lost work to the coronavirus crisis — means that more groups of people are eligible to receive unemployment assistance, including part-time workers and self-employed people.

“The average unemployment check is around $400 a week, and the CARES act adds an extra $600 a week for four months,” Hatton says. “That should be a good cushion of cash for most families.”

Ads by Ad Practitioners
Interested in online financial advisory options?
Click your state to begin planning a more secure financial future.
HawaiiAlaskaFloridaSouth CarolinaGeorgiaAlabamaNorth CarolinaTennesseeRIRhode IslandCTConnecticutMAMassachusettsMaineNHNew HampshireVTVermontNew YorkNJNew JerseyDEDelawareMDMarylandWest VirginiaOhioMichiganArizonaNevadaUtahColoradoNew MexicoSouth DakotaIowaIndianaIllinoisMinnesotaWisconsinMissouriLouisianaVirginiaDCWashington DCIdahoCaliforniaNorth DakotaWashingtonOregonMontanaWyomingNebraskaKansasOklahomaPennsylvaniaKentuckyMississippiArkansasTexas
Begin Working with a Financial Advisor
ADVERTISEMENT

Put bills on hold

Because of the epidemic, many lenders are letting borrowers suspend payments for some period of time. Federal student loan borrowers can take a six-month break, from March to September. No interest will accrue during this period, and borrowers won’t pay late fees or see dings on their credit reports.

Fannie Mae, Freddie Mac, and the Federal Housing Administration, which back millions of Americans’ mortgages, are all have programs to offer homeowners a recess from mortgage payments of up to twelve months, though the actual deal depends on your loan servicer. “I’ve seen several clients take advantage of this, and the application wasn’t crazy,” says Luis Rosa, a financial advisor in Henderson, Nev. Make sure you understand the terms of the suspension, he cautions. “A balloon mortgage payment later wouldn’t be much help.”

Other lenders are sometimes willing to cut borrowers a break, too. Rosa has a client who called her credit card company and got a two-month waiver on making minimum payments.

In most states, foreclosures and evictions are on hold, even for tenants who can’t pay rent. Private landlords can also apply to suspend mortgage payments. “One of my clients did this for his investment property,” Rosa says.

Your car insurance rate depends in part on how much you drive—a number that’s probably much lower without your commute. Call your insurance company and ask for a reduction. If you have children who are at home when they would normally be at college, ask for a room and board rebate.

Tap your assets in this order

Once you’ve eliminated unnecessary items from your budget, tap assets for cash. Begin with bank accounts: checking, savings, and certificates of deposit. “Cash should first be taken from sources where there are no fees, taxes or penalties to withdraw, and no need to liquidate investments that are at depressed prices,” says Andy Panko, a financial planner in Iselin, N.J.

If you’re forced to sell part of an investment portfolio, start with your taxable account and sell assets that have lost relatively little of their value. You can also take principal from a Roth account without owing taxes or penalty.

Tax-deferred retirement funds should be the last place you look for cash. The CARE act lets you take up to $100,000 from an IRA without penalty, penalty-free, or borrow the same amount from a 401(k). You’ll still owe taxes on whatever you don’t pay back, and you’ll lose that money’s long-term compounding power as a tool for funding your retirement.

Ads by Ad Practitioners
Start talking to a financial expert today.
At Facet, you work with a dedicated financial advisor about your particular needs. Click below and get started building your wealth.
Start Today
ADVERTISEMENT

More from Money:

30-Year Mortgage Rates Are Back Near Record Lows — For Some Borrowers

Small Business Loans and the Coronavirus Stimulus: Here’s How the Major Banks Are Handling PPP Applications

Here’s How College Admissions Are Changing This Year — and What High School Seniors Need to Know

You May Like

EDIT POST