Remember when your aunt used to stash her savings under the mattress for a rainy day? Well, that rainy day came in early 2020 when the COVID-19 pandemic devastated the global economy, leaving millions of people unemployed. Now, as we move out of the pandemic and back to normal life, it is incredibly important to be financially savvy and prepare for the worst. Below are five smart money tips tips that Caribbean-Americans should learn from this pandemic.
1. Saving for a rainy day is a must.
As tempting as a little retail therapy feels during these stressful times, you should hold off on shopping until you have an emergency fund worth three to six months of expenses. On average, aim to save 20 percent of your income and allocate no more than 50 to 60 percent of your paycheck to bills. There are many budgeting tools out there to help you create a plan that works for you and your family. And let’s not forget to add money to the retirement fund. Aim to invest around 15 percent of your income towards retirement savings.
2. Consider life insurance.
Life insurance is how we protect our families should the worst happen. Think of it this way; life insurance isn’t about your death at all. Rather, life insurance helps take care of your loved ones long after you are gone. Life insurance can cover funeral expenses, remaining debts, and loss of income for your family. If managed properly, for example, a $500,000 life insurance policy on a $50,000 salary would continue to pay out your salary to your family years after you’ve passed.
3. Credit is your best friend (if managed well).
Good credit means low rates of interest. So high credit limits can provide a safety net. If you lose your income for a time, you can cover your basic expenses and pay back only a fraction at a time until you get back on your feet. So if you need a credit card to keep you afloat during the pandemic, look for credit cards offering zero percent introductory rates. Those cards will keep you from accruing interest while you buy groceries and pay your utilities and car note, without worrying about additional interest. If you are struggling to pay your credit bill, contact your credit card company for assistance. Some companies are offering refunds on late fees, deferred payment options, or payment plans.
4. When in a tight spot, negotiate!
Talk to your creditors, landlord, loan officers, or car dealer to ensure you maximize your liquid assets and resources. Loan companies are more than willing to help those in financial distress as a result of COVID-19. The first step is to realize there’s no shame in asking for help. Also, if you are struggling to pay your cell phone bill, contact your service provider and request to either split up or postpone payment.
Consider reaching out to your apartment manager and explaining your situation. Be honest with your landlord about your unforeseen circumstances. If you were paying your rent on time and have never had an issue, they will likely find a way to help you. Contact your credit card company and/or loan agency to ask for accommodation if you cannot make your payment to avoid late fees.
5. Get familiar with government financial programs.
Lastly, keep up with the latest news and laws surrounding relief assistance and take advantage of free resources and tools available. Recently, the government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act and includes suspension of payment on federal student loans until September 20, 2020. That is one more bill that you do not have to worry about. The CARES Act also offers no penalties for withdrawing from a Roth IRA or traditional IRA account up to $100,000 if you were affected by COVID-19. Experian has also compiled a list of resources to help you manage debt during this crisis.
In all, this is the time to put into action all that you have learned about money management. Remember to do your research to ensure that you are maximizing your funds, so you can protect your family through this financial storm.
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