On Monday, I got a text from brother saying he understood now why I am always telling people to have an emergency fund. Due to the COVID-19 pandemic, both he and his wife are no longer working. It couldn’t come at a worse time for them, or for the millions of other workers who are no longer considered essential and not in a salaried position. They, along with millions of others, are now questioning what and who to pay.
Yes, you can open your emergency fund.
My brother and his wife were on a plan to eliminate their debt and were building their emergency fund. Let’s just say, timing turned out to not be on their side as they had yet to reach their savings goal and had to start dipping in to the funds they had. Many people don’t even have an emergency fund.
The value of having an emergency fund cannot be overstated. In times of crisis, you may not have time to wait for your government to issue aid, and it may be insufficient at best. For specific details on how much to have, read my post Government Shutdown Highlights Need for Emergency Fund. Keep in mind that you may need more if you have special needs.
In the current environment, you may be wondering if it’s ok to dip into your emergency fund. Yes, it is! IF, the funds are to be used for a true emergency that your unemployment, or government aid cannot cover. Keep in mind that if you were in the position of being paid hourly and are now not reporting to work, the unemployment benefit being offered by your state may be insufficient to replace your salary, and to cover your basic needs. So, if you are lucky enough to have an emergency fund, it’s ok to now use the fund.
Cover your necessities first: housing, utilities, medical, and insurance. Use what cash you do have coming in to cover your basics such as food, transportation, some form of entertainment, and the things that you rely on but simply cannot cut. However, you should immediately assess to see what items can be cut or reduced such as gym memberships, or entertainment. For example, go from a full cable package to basic only, or even to Internet only with streaming if you can do that. Your emergency fund can make up the shortage on true necessities such as housing.
Raise funds any way you can.
Next, transportation: keep up with your car payment, registration, insurance, and license fees. If you have two or more cars and don’t need all of them, consider selling one. It will be difficult in the current economic environment, but it’s better than continually accruing debt or the car being an on-going expense. In other words, if you don’t truly need it, let it go!
Debt payments should be examined. Are you in a debt repayment plan with your student loans and credit cards where you are using the avalanche or snowball method? Not sure what those are; read my series Five Keys to Financial Freedom: Key 2. If so, temporarily resort to making minimum payments only. For this current crisis, the government is considering whether some federal student loans are eligible for a temporary hiatus. Confirm whether your loans are eligible. If so, and you need to hold onto cash, contact your lender to determine your eligibility, and for how long, you may reduce or skip payments. Do this for other lenders as well. I call it, dialing for dollars.
Use what cash you do have coming in to cover your basics such as food, transportation, some form of entertainment, and the things that you rely on but simply cannot cut. However, you should immediately assess to see what items can be cut or reduced such as gym memberships, or entertainment. For example, go from a full cable package to basic only, or even to Internet only with streaming if you can do that.
Finally, keep the faith. Focus on the future and that this too shall pass. It will be a struggle, and it will be difficult. Over time though, you will get back on track and hopefully have a newfound appreciation for saving. Far too long in the United States we have pooh-poohed people who are savers and looked at cash savings as money doing nothing. Now, it’s front and center and being called up to duty. It’s never too late for you to adopt a saver’s mentality and change your future course of action as we recover from this pandemic.
As an independent Certified Financial Planner™, I can help you focus on your goals and long-term plan. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #letsmakeaplan #CFPPro #savemoney #COVID19 #EmergencyFund