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Financial Health in Uncertain Times

Ways to help keep your finances in check during the pandemic.

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As the coronavirus crisis stretches toward the summer months, many people have felt the financial pain of reduced portfolio values, as well as the uncertainty about whether things will ever “get back to normal.” But even though you might feel like you have no control over the volatile stock market and the painfully low interest rates, there are some things you can do to help keep your finances in check.

Sorting Out Your Financial Challenges

The coronavirus has been the catalyst for a long list of financial problems, including these serious challenges:

• Temporary or Permanent Job Loss:

Although a loss or reduction in income can be stressful, there are some things you can do to improve incoming cash flow. The first step should be to file for unemployment.

There are two ways that you can apply for unemployment benefits in Texas. One is to contact a Tele-Center by phone at (800) 939-6631. Or, you can apply online by visiting the Texas Workforce Commission’s website at: twc.texas.gov/jobseekers/unemployment-benefits-services#applyBenefits.

Due to the record number of people filing for unemployment, be aware that it has been taking much longer than normal to start receiving these benefits. The good news is that, according to the Texas Workforce Commission, unemployment benefits will be retroactive to early March 2020, when the governor issued a disaster declaration.

If you have permanently lost your job and you have a 401(k) or other employer-sponsored retirement plan, you have the standard options regarding those funds: leave the money in your plan (if permitted), roll over the assets to your new employer’s plan (if one is available and rollovers are permitted), roll over the money to an IRA, or cash out the account value. Be sure to consult a qualified financial advisor regarding any of these options in order to prevent unintended tax consequences.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows you to access money from a retirement account without incurring the 10-percent early-withdrawal penalty that is typically imposed on those younger than 59½. (Your withdrawal can still be subject to income tax, though). The CARES act also allows in-service distributions up to $100,000 if one has been impacted by the pandemic. If you are unable to “re-contribute” your emergency distribution to another retirement plan or IRA within three years, the new law allows taxes to be paid on the distribution over three years.

Since income loss can also make paying your bills more difficult, you should cut any unnecessary expenses and stick to a budget to help relieve some of your financial challenges.

The Trump administration has suspended federal student-loan payments during the pandemic, as well as interest charges on these types of loans. According to the U.S. Department of Education, all borrowers with federally held student loans will automatically have their interest rate set to zero percent for a period of at least 60 days. Further, these student-loan borrowers will have the option to suspend their payments for at least two months.

You may also be able to lower some of your other monthly financial obligation(s) by taking advantage of lower interest rates and refinancing your mortgage or other debt. Before you refinance any type of loan, though, be sure to compare your overall costs, which oftentimes include application fees, closing costs, and other expenses. Also, even if refinancing makes sense from a lower monthly payment aspect, if the term of the loan is extended, refinancing could still end up costing you more in total interest payments. So make sure that you review all of the potential pros and cons.

In light of the COVID-19 crisis, credit-card issuers, mortgage companies, and a host of other lenders are allowing borrowers to defer payments. These relief efforts are not necessarily automatic, though, so it is important to contact each creditor directly and inquire about relief efforts that are available to you. In many cases, delaying payments won’t impact your credit score, so it can be well worth it to take advantage of these programs.

Relief for Small Business Owners:

Small businesses are the backbone of America. If you own a company, you may be able to participate in various programs that provide grants and low- or no-interest loans. For instance, the Economic Injury Disaster Loan (EIDL), offered through the Small Business Administration, could provide help if your business or nonprofit entity has suffered economic injury as a result of the COVID-19 outbreak. Also, the Paycheck Protection Program is another possibility.

There have been some bumps along the way with these programs as the initial government funds are quickly exhausted. Hopefully, more funds will be made available to small businesses.

• Volatile Investment Performance:

You may be among the many investors watching retirement plans or other investments drop dramatically in value. Although you may be tempted to just “cut your losses” and cash out, resist the urge to do so!

During this time, it is more important than ever to remain calm and stick with your financial plan. As the stock market turmoil causes the share price of many good, solid companies to fall, it can also create a good buying opportunity in the long run if you have any additional cash on hand that you don’t need in the short term.

Although the financial impact of the coronavirus may seem different than other disasters like 9/11 and the 2008 recession, one thing that those events had in common is that the markets eventually recovered. So even though it may take some time, remain calm and avoid basing financial decisions on emotions, which can often cause more harm than good to your finances. That’s the way to remain on track with your current and future goals.

• Personal and Professional Isolation:

One of the most difficult aspects of the coronavirus crisis is having to isolate socially and only go out for essentials like food and medication. Yet, as hard as this may be, isolation is necessary to help stop the spread of the virus. And even as we minimize our trips and take all the precautions, it’s important to remember the seniors in our community who may not be able to get the food and supplies they need. So be sure to check on older friends, family, and neighbors while still maintaining social-distancing requirements.

Many people have been taking advantage of “virtual” get-togethers. Using FaceTime, Zoom, or other similar apps, it is possible to have more personable meals and chats “together,” without being in the same room or even in the same city.

Moving Forward with More Financial Control

Making adjustments to your financial plan can sometimes feel a bit overwhelming (particularly given the current roller-coaster stock market), and moving forward can have an emotional impact. That’s why I recommend discussing your current plan and your future objectives with an experienced, professional financial advisor— ideally one who is also well-versed in the needs of the LGBTQ community. That way, you can feel more comfortable knowing that the recommended strategies are appropriate for your specific situation.

This article appears in the May 2020 edition of OutSmart magazine.

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Grace S. Yung

Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the September 2017 issue of Texas Monthly.

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