By Baruch Silvermann
Regardless of where you live or what industry you work in, you’re probably feeling the effects of the coronavirus crisis. The spread of COVID-19 has caused much more than just health problems—it’s also affecting the way our economy works. In order to protect people from the virus, many businesses have come to a halt. In many places, all non-essential businesses have been forced to close.
As a reaction, global markets have fallen on a sharp downward trajectory since February, when the virus started to spread. At the end of April, the Dow Jones was down 15.1% since the start of the outbreak, and that’s after hitting rock bottom in mid-March.
This means that day-to-day life for workers has changed dramatically in the span of just a few weeks. For those who work in food, hospitality, or retail, this can mean an indefinite layoff, or at the very least, a loss of work hours. The economic impact is so widespread that even office workers outside of affected industries may be experiencing temporary layoffs due to lost revenue. Freelance and gig workers also have been heavily impacted as many companies don’t have the money to spend on non-essential services.
Simple ways to cut costs during an income gap
If you’re experiencing a loss of income right now, there are things you can do to weather this storm financially. This means looking for new opportunities, as well as changing the way you currently spend money. Here are some steps you can take to get through this time of financial instability.
The first thing to do is look for ways to cut costs. It’s likely that you’re already cutting back on your spending anyway, since you won’t be going out to eat or shop as much. However, there are plenty of other expenses you can reassess to cut back on spending. For example, now is a great time to look at your transportation costs. You may want to consider temporarily cancelling your auto insurance if you won’t be driving, or even switching from a car to a bike.
Another way to cut costs is to reassess the way you eat and drink. If you normally stick to prepared foods, now might be the right time to master a few basic recipes. Although many restaurants offer takeout, try to resist the temptation and cook at home instead. Look at your other expenses—which ones are truly necessary and which ones can easily be replaced? Clothing, fitness, and entertainment are all areas to look at when cutting back.
Once you’ve decided where to cut costs, write down a temporary budget for the next few months. Start by writing down your non-negotiable expenses, such as rent, groceries, and utilities. Then add the amount of money you’ll have coming in during this time, if any. Once you have everything on paper, you’ll be able to determine how much you can spend, or if you’re running at a deficit, how much money you’ll need to make.
Boost your cash flow during coronavirus
There are a number of ways you can supplement your income during this time, so that you still have money coming in. If you have savings or an emergency fund set up, now is the time to use it. However, try not to deplete your savings right away; keep in mind that right now we don’t know how long the COVID-19 crisis will last or what sort of financial challenges you may be facing in the future.
Everyone who has lost work should also apply for unemployment assistance funding. The federal government recently voted to expand unemployment protection. This means that freelancers and other employees who may not have qualified for unemployment in the past will now qualify for benefits under the CARES Act.
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The CARES Act provides an extra $600 per week in unemployment payouts for those who are already getting them, as well as the ability for self-employed and gig economy workers to apply for unemployment. Unemployment benefits may not completely cover your former paycheck, but they are designed to cover basic expenses. Even if you are planning on going back to work as soon as possible, it’s worth taking advantage of any benefits you qualify for to help you stay afloat during this crisis.
Additionally, you may want to consider taking loans from family or close friends during this time. Although it can be difficult to ask for help, this is a more effective strategy than taking out a loan from a bank or relying on credit cards, because you won’t have to worry about interest or any hits to your credit score. If you own a business,consider taking out a zero-interest small business loan from the Small Business Administration to sustain your operations.
There are also plenty of ways to make a little bit of extra cash from home with a reliable internet connection. If you’ve always wanted a “side hustle,” now is as good a time as any to get started with a new venture. It’s important to be realistic about what you can earn during this time. Chances are, you won’t be able to completely replace a paycheck from a full-time job, but you may be able to soften the blow of a job loss. Start by looking for ways to monetize the skills you already have.
For example, if you have extensive experience in business, finance, or marketing, you may be able to work as a part-time consultant for brands online. If you like to make jewelry, kitchenware, or clothing, consider selling your wares on an online marketplace like Etsy.
There are a number of easier ways to make money from home as well: by taking online surveys, testing apps, transcribing audio files, or even just selling your old items on eBay. It may not make you rich, but those extra dollars can add up quickly.
Key behaviors to avoid during the quarantine
If you’ve lost work as a result of COVID-19, it can be tempting to jump at any opportunity for some extra cash. However, there are some things that can actually hurt your financial standing more than they help. Here are some financial risks you should avoid taking during this time.
- Relying heavily on credit cards. It can be very tempting to open additional credit cards or to use them for all of your expenses. However, this can have disastrous financial consequences later on. It can negatively affect your credit score, particularly if you aren’t able to make your payments on time. A poor credit score can make it difficult to rent an apartment, take out a mortgage, lease a car, and more. Credit cards also come with high interest rates, so you’ll end up needing to pay back much more than you originally borrowed.
- Incurring high-risk, high-interest debt. Personal loans, particularly payday loans, come with high interest rates and will negatively affect your credit score if you can’t pay them back on time. You should also avoid taking out home equity loans or car title loans, as these loans are directly tied to your essential property.
- Borrowing from your retirement account or your life insurance policy. These accounts are usually set up to grow over a certain number of years with an investment plan. In some cases, you’ll have to pay back the money you borrowed from your account. Since these accounts invest your money, it could be very difficult to replace the funds that were previously in your account. If you have stocks outside of these accounts, you should avoid selling them as well. Even if your stocks are losing value in the short term, it’s important to remember that the markets will fluctuate several times before this crisis is over. Chances are, you’ll end up with more money in the long run by just riding it out.
- Panic buying essential items. While it’s a good idea to have a few extra toiletries and supplies on hand, don’t overdo it. Not only does this make it difficult for other people to get the resources they need, but it also means you’re overspending in a time when you just don’t have the cash flow to sustain it. Now is also not a good time to make large purchases like a car, expensive electronics, or a vacation.
Dealing with a loss of income can be very challenging. Because this crisis came on suddenly, it was difficult for even those with the most stable finances to prepare for. It’s important to remember that we are all in this crisis together, and although there will be some tough months ahead, things will eventually go back to normal. Taking steps to adjust your budget and looking for reliable new sources of income can help to soften the blow and keep your finances stable until you regain your income.
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