by Christy Bieber | Sept. 10, 2020
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Are you in danger of being ensnared by them?
COVID-19 has made money management much more difficult for millions of Americans, especially those who have seen their incomes fall due to a job loss or reduction in hours.
But while there are some things you can't change during the pandemic -- such as whether your business has been allowed to remain operational -- there are a few key money mistakes you can avoid if you're aware of them and are careful.
To make sure you don't inadvertently make your financial situation worse, here are four money traps you'll definitely want to make sure you don't fall into.
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Although states have started to loosen restrictions, many people are still limiting travel and going out as little as possible to avoid exposure to the novel coronavirus.
While you may think it would be easier to save money if you aren't going on trips or dining out, the reality is that boredom can often lead you to mindless spending -- especially if you're spending all day working from home on your computer -- it's all too easy to let a click of the mouse lead you wandering to your favorite e-commerce site.
To make sure you don't buy things you don't really need, adjust your budget to account for the new coronavirus reality and stick to it. You may also want to remove your credit cards from your online accounts, since the need to add them manually creates an additional barrier and gives you the time to think about whether the purchase is really justified.
If you're experiencing financial struggles because of COVID-19, you may need to borrow money to help you stay afloat. But if you do, make sure you're smart about it.
Record low interest rates on mortgages, for example, may have you considering a cash-out refinance loan to tap into home equity. While this may make sense since you can borrow at a very low rate to cover the essentials, it would mean you're taking on secured debt and staking your home on your ability to pay it back.
You should consider other options such as 0% APR credit cards before you go this route. These cards offer 0% for an introductory period, so you can charge what you need and pay off the debt when you get back on your feet without owing interest. Using a 0% APR card could also be a better bet than raiding your 401(k) -- even though the CARES Act has made it easier to borrow or withdraw from it -- as you won't be jeopardizing your retirement security.
According to The Ascent's research, there has been an uptick in consumer fraud due to coronavirus. In fact, Americans have filed more than 184,000 fraud reports related to COVID-19 as well as coronavirus stimulus checks -- and they've lost more than $124 million.
These scams have taken many forms, including fake work-from-home jobs, advertisements for COVID-19 treatments or testing kits that don't work, online shopping and travel scams, and identity theft or phishing attempts related to coronavirus stimulus payments.
While you should be able to recover most or all of your funds if you get scammed when you use a credit card, it can be difficult or impossible to get money back that you've wired. Coping with identity theft is also a costly hassle.
No one needs additional stress right now, and you don't want to suffer losses due to dishonest actors during these difficult times. To avoid this, make sure you don't give out your information to anyone you don't know; don't purchase anything that seems too good to be true; and never wire money.
Finally, COVID-19 has resulted in a major uptick in market volatility. It may be tempting to pull back on your investing or even to sell stocks at a loss if you're afraid things will get worse. But doing any of these things is a bad idea.
If you're happy with your investments and have a diversified portfolio, try to stay the course. And you may even want to consider increasing the amount you invest, as stock market crashes can present buying opportunities.
Avoid the money traps on this list, and you'll have a better chance at staying on track financially so that COVID-19 won't derail your efforts to accomplish your goals.
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