Having your income dry up because of a job furlough or layoff can be a scary thing, especially during a global pandemic like the coronavirus. But it's not time to hit the panic button. Government assistance, including emergency unemployment benefits, stimulus payments, student loan forbearance, and mortgage forbearance, can help fill the financial gaps if you're struggling during the COVID-19 crisis.
The American Rescue Plan was passed in early 2021 to help the country recover from COVID-19. Included were financial aid provisions to prevent foreclosures and rental assistance. This includes USDA loans, VA loans, FHA loans, and loans guaranteed by the Office of Native American Programs.
Renters weren't forgotten, at least at first. The Centers for Disease Control and Protection (CDC) extended a federal eviction moratorium when it expired on July 31, 2021, but the Supreme Court ruled on Aug. 26, 2021, that the CDC had exceeded its authority in doing so and this extension therefore didn't happen.
These tips can help if you're wondering how to make your money stretch even further when you don't have an emergency fund to fall back on.
Expenses You Can Cut
The first step in making your money stretch when your regular paychecks disappear is deciding what you need to pay and what you can do without.
Basic living expenses typically center around housing, utilities, and food. This means keeping up with rent or mortgage payments, paying electric, water, or gas bills, and buying basic groceries as part of your bare-bones budget. Keep in mind that you may have some built-in relief for these expenses during the coronavirus pandemic.
The federal American Rescue Plan gave financial assistance to eligible homeowners beginning in January 2021. Federal student loan borrowers could also pause payments (including interest) on loans through Jan. 31, 2022. This forbearance provision was extended in December 2021 to last until May 1, 2022.
Student loan relief includes Federal Family Education Loans (FFEL) owned by others. Taking advantage of these provisions could give you a short-term break from paying those bills.
Anything beyond the basics of housing, utilities, and food may be fair game for reducing your monthly budget expenses. Some expenses you might think about eliminating include:
- Streaming services
- Gym memberships
- Print or digital newspaper and magazine subscriptions
- Takeout meals
- Clothing, accessories, or toys
- Hobbies and recreation
Jeff Rose, a certified financial planner and founder of Good Financial Cents, told The Balance via email that it’s important to pay attention to the details. Rose said that meal planning and focusing on unit costs when you're shopping can help minimize spending if food is a big part of your budget. You can also save on energy costs by only running the dishwasher with full loads and keeping your freezer stocked so it runs more efficiently.
Consider trimming overlooked expenses, such as bank fees, too. Switching from a traditional bank to an online bank could save you money if you're able to avoid monthly maintenance or minimum balance fees.
Negotiating your bills is another idea for making your money stretch, according to Rose. Bundling car insurance with homeowner's insurance or increasing your deductibles could reduce your monthly or annual premiums. Reducing your cell phone or internet service plan can lower those expenses.
You may qualify for a credit card hardship program if you have credit card debt. These programs can reduce your annual percentage rate (APR), lower your monthly payment, or allow you to defer payments temporarily.
Talk to your biller to understand how it may affect your credit score before agreeing to a deferment or forbearance for debt payments.
Ways to Get Cash Quickly
It pays to brainstorm ways to bring in extra income when you're short on cash. Applying for unemployment benefits is one part of the puzzle, but it can take weeks for you to begin receiving payments. Consider other ways to boost your income and cash flow in the meantime. According to Rose, you might consider:
- Decluttering your home and selling things you don't need
- Joining the gig economy as a grocery store or restaurant delivery person
- Starting an online side hustle, such as freelancing or tutoring
- Using apps that pay you cash back when you shop
- Offering services locally, such as lawn care or running errands for people who can't or don't want to leave home
Consider the cost to you if you're thinking about doing something outside the home to make money. You're responsible for paying for gas and car insurance, not to mention the wear and tear on your vehicle, as a delivery worker. Any costs you have to pay should be justified by what you can potentially earn.
Savings You May Not Have Thought About
The COVID-19 crisis may have negative consequences on your finances, but there can be some silver linings. Look at your budget to see how your spending habits have changed during the stay-at-home orders. You could be saving a significant amount of money if you're not:
- Eating out at restaurants
- Traveling for fun
- Socializing with friends
- Commuting to work daily
- Impulse buying at the grocery store
- Shopping for new clothes
It adds up to $1,200 in savings minus the cost of food for home-cooked meals if you normally spend $200 a month on eating out and you cook all your meals at home for six months.
Seeing your savings from this perspective can help you find the bright spots, especially during a financial crisis.
There are a few more things to consider if you've run out of ideas for how to make your money stretch. You could open a new credit card account to help buy the things you really need, but this isn't necessarily ideal.
"If your income has dropped, now is not the time to rack up credit card debt if you can avoid it," Rose said. "Use cash or debit cards if at all possible."
Tapping into your retirement savings account was another option in 2020 and it continues into 2021. The American Rescue Plan allows you to borrow up to $100,000 from a 401(k) or an IRA with no 10% early withdrawal penalty.
Funds withdrawn from an IRA or 401(k) retirement account are taxable as income. You can replace those funds without impacting annual contribution limits, just like a retirement account rollover. You'll have three years to complete any repayment.
Finally, you might try talking to a credit counselor about your financial situation. A credit counselor can help you develop a workable budget and discuss solutions for managing past due bills or debt payments to minimize negative impacts on your credit score.
Stick with a nonprofit credit counselor, and be wary of any organization that asks for an upfront fee before offering credit and debt advice.
Make Sure You Take Action
The worst thing you can do when you're strapped for cash is nothing, especially in a situation like the COVID-19 pandemic. Sticking your head in the sand and ignoring the bills will only make things worse. Come up with a plan to tackle those bills instead. Cut expenses as much as possible. This will make the financial storm easier to bear until it passes.