Don't let COVID-19 hurt your financial situation -- make these four smart money moves instead.
COVID-19 has changed many aspects of American life, mostly for the worse. Sadly, the public health crisis caused by the novel coronavirus is also an economic one. Many people have lost their jobs or are worried about their long-term financial security.
If your income or other aspects of your money management have been affected, or you worry they could be in the future, there are a few key steps you can take. These will shore up your financial situation during the crisis, and perhaps even improve it over the long-term.
Here are four of them.
1. Make sure your emergency fund is big enough
It's always important to have an emergency fund, but it's essential when facing unprecedented levels of uncertainty. Emergency funds help you avoid debt and ensure you can cover unexpected expenses if you get sick or lose your job, both of which are more likely right now. And there's something to be said for the peace of mind you'll get from knowing that you have the money to cover any surprise costs.
The customary recommendation is to have three to six months of living expenses in your emergency fund, but during these times, it can't hurt to have more saved. Aim to build a fund that will cover your basic costs for at least six months, and perhaps longer if you feel your job or health are at especially high risk.
It will undoubtedly take time and perhaps some budget cuts to build such a large emergency fund. But with dining out and many entertainment options off the table due to the virus, you may have extra funds to save.
2. Explore benefits available to you if you need them
If you've lost your job or experienced a cut to income, you may not have the luxury of making many money moves as you struggle to cover the basics. If that's your situation, make full use of any benefits available to you. Beyond unemployment, this could mean applying for Medicaid if you've lost health insurance, or looking into programs such as the Supplemental Nutrition Assistance Program (SNAP).
These programs can serve as a lifeline for the millions who are out of work -- and you pay for them with your tax dollars, so don't hesitate to use them now in your time of need.
3. Consider refinancing your mortgage to take advantage of historic interest rate lows
If you're a homeowner, now may be a great time to refinance your mortgage as rates have repeatedly hit record lows. If you qualify for a refinance loan at a lower mortgage rate than you're paying, you may be able to both drop your monthly payment and potentially reduce your total repayment costs. Pay attention to the closing costs you will have to pay and make sure you don't lengthen your repayment timeline by too much.
You'll need to have proof of income and a good credit score to qualify for a refinance loan. But if you meet the criteria and plan to stay in your home for the foreseeable future, there may never be a better time.
4. Make smart decisions about investment accounts
If you've got money invested, it's easy to panic when you see a volatile stock market. But as long as you've got a diversified portfolio and a sound investment strategy, you shouldn't need to worry. Historically, market crashes have always been followed by rallies, so assuming that you don't sell and lock in your losses, your portfolio should recover.
In fact, recessions and bull markets often present buying opportunities. If you see the market start to fall again, you may opt to actually increase the amount you're investing.
COVID-19 doesn't have to hurt your financial situation
For millions of Americans, COVID-19 may cause some short-term financial pain. But if you make these four money moves, you'll be able to get through the crisis without any lasting impact on your financial security. You may even end up in a better place financially once you get to the other side.
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