Financial Tips For MO Residents For COVID-19
Even if you are not a farmer, there is a slim chance that your life, as well as your livelihood and savings, has not been affected by COVID. The basic tips outlined in this article can help Missouri and Iowa residents better understand how to protect, preserve, and manage personal assets during this unique time, as we ride out the pandemic together.
1. Take a Conservative Approach
Now is not the time to take big risks like taking on significant new debt if you are concerned about loss of income. However, if you feel fairly secure with your job, that doesn’t necessarily mean that you have to put off major purchases like buying a house. In fact, many argue that times of economic downturn provide opportunities for many to buy homes who ordinarily couldn’t, especially younger generations. The important thing is to be conservative with the amount of debt you can take on, and stick to the low-end of your budget.
Regarding your investments, it’s easy to feel concerned about how the erratic stock markets during this time will affect your retirement plans. But keep in mind that the recovery from COVID will likely happen quicker than our last recession, and even though it took a while, we did eventually recoup losses from the housing crisis of 2008. In the meantime:
- Don’t make any spontaneous decisions or changes to your investments or retirement savings. When markets are down, it is usually better to let them recover in time for long-term investments.
- Talk to your financial advisor to discuss your financial goals and concerns before making any changes.
- Don’t make early withdrawals if you can avoid it. Unless you are experiencing financial hardship due to the pandemic, if you take an early withdrawal from your 401k before age 59 ½, you’ll have to pay income taxes on that money, as well as a 10% penalty, forfeiting tax-advantaged growth and possibly triggering a higher tax bill.
2. Reduce Spending to Avoid Dipping into Savings
If you are experiencing a loss in income or concerned about how you will manage on reduced unemployment benefits come July, you should think about ways to reduce your spending so that you do not rely on retirement savings and investments–or worse, bad debt like credit cards and payday loans. If you are at risk of losing your home, keep in mind foreclosures have been temporarily suspended and you may qualify for temporary forbearance due to COVID-19. If you are still staying afloat but are concerned about consequences of loan-term debt, now is a good time to talk to your local lender about debt consolidation or refinancing high-interest loans, especially with the current low interest rates.
Even though you may need to reduce spending, you should strive to do so while continuing to support the local economy. Buy your food directly from local farmers. Purchase other goods from locally-owned businesses and shops. Give preference to local restaurants over chains. Local businesses need our support during this time. Only when you patronize establishments owned by members of the community will your money actually stay in our local economy, supporting our workers and their families. For more information on how to help struggling Missouri businesses, visit this Missouri Chamber of Commerce.
3. Prepare for Change
No matter if you are feeling financially secure right now or are already experiencing hardship, it’s crucial during times of uncertainty to prepare for potential change and disruption to your daily life.
4. Wait to Finalize Future Plans
Because there is so much uncertainty regarding COVID-19, the plans that you had for this year and the foreseeable future may not come to fruition–at least in the ways you thought. Across the country thousands of graduating high school seniors are reconsidering college, families are rethinking planned moves, and businesses are drastically changing their operations, holding off on major expansions. Likewise, it might be smart to wait–even a few months–before acting on major life plans. In as early as a few months we’ll know more about possible treatments and vaccines that could change everything in the face of COVID. But don’t stop planning for the future. Keep making contributions to retirement and college savings plans, because missed contributions now could result in big losses down the line.
5. Reach Out for Help
There are many opportunities for assistance to keep you and your family financially secure during this time. If you are struggling to make your monthly payments you may be able to put a temporary hold on your student loans or mortgage through the recently-passed CARES Act. Additionally, if you have lost any income due during this time, be sure that you have applied for the expanded unemployment benefits. You can find out more about how to apply through the Missouri Department of Labor Coronavirus Information page.
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If you are concerned about your finances and aren’t sure where to start, a good place to get advice, pandemic, or no pandemic, is your local financial institution. Your community bank can not only help you navigate mortgage forbearance or refinancing home loans, but can provide you guidance on savings and retirement planning and other major financial decisions. Contact us at BTC Bank or stop by one of our branch locations to learn more about how we can assist you as you navigate life during the pandemic.