It's no secret that the economic impact of COVID-19 has been extreme. U.S. unemployment levels are now at an all-time high, and countless businesses are at risk of never managing to reopen their doors. And while 29% of Americans say that their household income hasn't changed due to the crisis, not everyone is that fortunate. In fact, 22% of Americans say that their family's income has dropped by 50% or more ever since the pandemic took hold, according to a new J.D. Power survey, while 39% say it's declined by 25% or more.
Given the number of Americans who were living paycheck to paycheck before COVID-19, many households can't withstand any loss of income. If your earnings have taken a hit in the course of the past number of weeks, here are a few steps you should take.
1. File for unemployment benefits
You may not realize this, but you don't need to be completely out of a job to qualify for unemployment benefits. In some cases, you may be eligible even if you're still working, but your hours have been cut. If your income has gone down, it pays to see if you qualify for any amount of unemployment, as that extra money could bridge at least part of that gap.
2. Assess your emergency savings
The purpose of an emergency fund is to allow you to cover your bills when your income goes down, or goes away. If you're bringing in less money than you're used to, figure out how to tap your emergency savings strategically. You're better off withdrawing from your bank account than racking up costly debt to stay current on your expenses.
3. Ask for relief with regard to paying bills
If you're having trouble keeping up with your bills because of your recent income loss, help may be available. Many mortgage lenders are letting borrowers put their home loans into forbearance, while landlords are being more flexible with rent collection. Auto lenders and credit card companies are offering leeway as well, as are utility companies and internet service providers. If you're having a hard time financially, reach out and request assistance -- if you don't ask, you won't get it.
4. Look into your borrowing options
There may only be so many bills you can defer right now. If your income can't cover those expenses you can't delay, you may have no choice but to borrow money. But don't rush to borrow in the form of a credit card balance, because that's an easy way to damage your credit score and incur a ton of interest. Instead, explore more cost-effective options. If you have equity in your home, you may be able to borrow against it. And if your credit is strong, you can look at applying for a personal loan through your bank. Another option is to borrow from your 401(k) plan. Though there's a danger in going that route, at the very least, you'll be paying yourself back in the course of repaying that loan, as opposed to paying interest elsewhere.
Many people are in bad shape financially right now, and the longer the economy remains shut down, the worse things are apt to get. If your income has taken a hit in recent weeks, map out a strategy for getting through this difficult time, and don't be shy about asking for help, whether it means deferring some bills or taking a modest loan from a friend who hasn't been hurt by the crisis.
And if you're in the minority of people who are actually thriving financially right now, it wouldn't hurt to step up and help those who aren't. An estimated 5% of families have seen their income increase during the pandemic, so if you're part of that statistic, consider paying some of that forward.