We’re smack-dab in the middle of a major economic downturn, and it’s hard to say what the future will hold for our finances. Experts keep telling us to “focus on the things you can control,” but with a recession looming, tens of millions of Americans losing their jobs, and a global health crisis, so much seems out of our hands. So what are those things we can control?
We asked Farnoosh Torabi, a financial journalist, author, and host of the So Money podcast. (In case you missed it, Torabi was a recent guest on The Financial Confessions, too — be sure to check out the episode here.)
Torabi says that while the verdict is technically still out on whether or not this is an official recession, it’s imminent. “We can’t say officially until we experience two consecutive quarters of negative economic growth,” Torabi says. “But I’d argue that we will look back on these spring months as when the 2020 recession began.” Bloomberg Economics created a model to predict America’s odds of a recession in the next year, and their prediction now stands at 100%.
If you’ve lost your job, stay insured.
If you’ve lost your job, you probably already know that you need to file for unemployment and revamp your budget.
And the federal government has issued more relaxed guidelines for filing for unemployment. Every state’s unemployment rules are different, so check with your state’s unemployment program to see what’s offered.
Beyond that, Torabi says it’s crucial to make sure you stay insured. Secure health insurance, either through COBRA or purchasing a more affordable plan on the marketplace. “It’s important now more than ever,” she says. Remember, in addition to a financial crisis, we’re also in the middle of a health crisis, so health insurance is not something you want to skip out on right now.
Prioritize your bills.
“Also, attack your necessary bills and know what can wait,” Torabi adds. “Before you jump to pay your rent, can you negotiate a deferment with your landlord? Federal student loans are also something that you can hold off on, as the stimulus is allowing borrowers to skip payments through September 30th. And those credit card bills can also be negotiated by calling your credit card company.”
If you’re married, it’s time to have a serious financial discussion with your partner about how to reduce your budgetary expenses and build up a solid savings cushion, if at all possible.
If you’re still employed, save as much as you can.
If you’re fortunate enough to still be employed, you don’t necessarily want to assume you’re in the clear, Torabi warns. “Prepare for the worst. You have the benefit of time and a whole paycheck. If you don’t have at least a 6-9 month rainy day account, this should be your priority. If you’re self-employed, I recommend a 12-month rainy day reserve.”
Strategize your stimulus check.
As for the $1,200 stimulus check, Torabi says most people will — or should — be using it as emergency relief. “If you have immediate bills to pay that if you neglect could damage your credit or put you in more financial risk – credit cards, your mortgage, I would address that first with the stimulus check,” she says. “But if you can afford your bills without the stimulus, the best way to spend it is to NOT spend it. Put it in savings. You may find a good reason to use it in the months to come.”
Finally, what can we learn from the 2009 recession that’s applicable to this downturn? “Those who took matters in their own hands by starting a side hustle, negotiating their bills, and making vast changes to their spending in the last recession were able to come out on top,” Torabi says. It’s also important to note that now is not the time for overly emotional, impulsive financial decisions.
“For example, those who didn’t make knee-jerk, fear-driven reactions to the falling stock market, and kept investing or at least kept their investments intact, lived to see the rewards,” Torabi says. “There’s something to be said about staying still, which we’re getting a lot of practice with these days.”
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