June 30, 2020 · Budget, Credit, Investment, Savings

Making Tough Financial Choices in a Tough Economy

Our nation's economy has been struggling due to the unique effects of the coronavirus (COVID-19) pandemic, and millions of people have found themselves temporarily or permanently unemployed as businesses have closed to help prevent the spread of the virus to employees. For those unemployed, financial hardship is a reality they are facing now or will soon face as their income has stopped or gotten smaller. Even the government’s Economic Impact Payments may provide only limited fiscal relief for Americans whose personal debt may be increasing while their funds are decreasing. With less money, it’s essential to be very careful with spending it, and to think about what you could do now to trim expenses. Following are some suggestions on how to either cut, shrink or delay a few of the everyday costs that we regularly pay. For information about Delta Community's commitment to support our members experiencing financial hardships, please visit DeltaCommunityCU.com/Coronavirus.

Some of these suggestions offer tough choices for changing your lifestyle and, consequently, your life. But tough times often require hard decisions for short- or long-term financial health. Below are some ideas for managing your money now:

  • Hold off on making any big purchases unless they are essential. Buying a new motorcycle or boat for recreation is something that can probably wait, but replacing a broken, unfixable refrigerator is a necessary spend.
  • For things that you have to be buying now, such as durable goods (appliances, electronics, furniture and other items that can be used for years) consider whether buying gently used or renewed (repaired to work like new with an active warranty) items may be a way to get what you want and save money. Both online retailers and auction sites offer used and renewed goods.
  • Try to negotiate lowering your rate plans with utility providers (for services such as home security alarms, electricity, home phone service, natural gas, trash pick-up, water, etc.) and ask if budget billing is available for your account—budget billing is when a utility company is willing to offer you a set, flat amount (instead of a variable amount that can go up or down) due each month for a specific utility.
  • Switch to or negotiate a lower rate plan for internet or cellular service. You may not need all the features of your current internet or cellular services plans. Look at your usage and decide if (depending on the type of service) a slower connection or an account with less monthly data with the same provider could still work for you. You may also try to negotiate rates, and don't hesitate to switch providers for a better deal, especially for cell phone service, which can be highly competitive.
  • Try to work out a revised payment plan for your mortgage or car loan. You may be able to defer paying the mortgage or car loan for a few months with no interest or fee penalty, or you may be able to temporarily lower the amount of each month's payment without a penalty. Contact your loan provider to find out if they are offering any relaxed loan terms.
  • Switch to a different insurance policy or possibly negotiate a lower rate for car or home insurance. Similar to internet and cellular service, do your research and see if a different insurance policy with your current insurance carrier (or switching to a new carrier) can lower your costs.
  • Try to reduce or defer paying school tuition. If you’re paying to attend college yourself or are paying elementary, high school, or college tuition for other people, check to see if the school is offering to lower tuition due to students taking online (rather than on-campus) classes. Also ask if the school is offering extended deadlines for when payments are due.
  • If you are a two-car (or more) household, consider whether you can give up one car permanently. Think about if you could give up one car and either car share, use public transportation or carpool to get to work or do some errands. Selling a car can bring in cash and lower gas, maintenance, and insurance expenses. If you have a car loan, then selling the car makes sense only if the value of the car is great than its loan cost.
  • Cut your paid streaming entertainment services, both video and music, if you have them. Cut out other paid non-essential subscriptions to websites, magazines or email newsletters.
  • If you have investments and need cash, consider very carefully whether investments that have lost value can be sold off to provide money for current expenses. Selling off an investment that is worth less than when purchased also may provide the opportunity to lower your taxes; you should discuss all possible selling decisions with a Financial Advisor before taking any action.
  • See if you can negotiate deferred or lowered rent payments due to financial hardship. With so many people and businesses having cash flow problems, landlords may be flexible on rent amounts and payment deadlines, so negotiating with your landlord is worth trying. But if keeping your apartment is just not possible due to money problems, then consider the advantages and disadvantages of abandoning your lease and moving in with a close friend or relative to lower expenses for a limited time.
  • Cook more at home rather than getting takeout or delivery. Both large grocery chains and smaller ones are offering either semi-prepared, all-in-one (all ingredients included) meal kits that can feed two to four people at discounted prices, or they are providing recipes with discounts on some of the required ingredients, such as vegetables or meat. If you can't cook all the time (or just need a kitchen break), some take-out and delivery restaurants are also offering discounts, such as special menus with large, family-style portions that are cheaper than individual meals.
  • Buy store brands at the grocery store. Store brand foods can be almost exactly the same as well-known brand names, with the same—or very similar—ingredients, preparation, texture and taste. You can save significantly by purchasing store brands, so be willing to look for and substitute them for the more visible name brands.
  • Hold off on buying gifts for birthdays, anniversaries, school graduation, bridal, wedding or baby showers or for major holidays. During tough times friends and family should understand that buying a gift for a special date, event or holiday may not be possible at all or may need to be delayed for some time.
  • When stores are open again, offer some of your gently used clothing at a consignment store to try to bring in some extra cash—again, do this after people start back shopping at stores. Alternatively, you may donate clothing or goods to charitable organizations and then you may be able to get a tax deduction for whatever you've donated; be certain to get the receipts from the charity for what you give it.
  • Stop or limit monetary donations to charitable organizations. Even during hard times, Americans are generous about giving to a large number of worthy organizations. But if you’re experiencing financial difficulties, this may be the time to put off giving money to others so that you can help yourself until your situation improves.
  • If you have trouble keeping track of your expenses, income, and savings, then create a household budget; it’s easier to plan where you’re going when you know where you are now.

Many of the above ideas include decisions and actions that many of us might not normally consider if the U.S. economy and our personal financial circumstances were in better shape; but unusual situations require new thinking and attitudes, and while change can be challenging for many of us, sometimes it is necessary. Review the suggestions above carefully and consider acting on some of them if you believe that they may help you and your family. As mentioned above, you may learn about Delta Community’s commitment to support our members experiencing financial hardships on our website at DeltaCommunityCU.com/Coronavirus.

If you'd like to get ongoing information that may help you manage your finances during a tough economy, then consider attending free Delta Community Financial Education Center webinars on a wide range of financial topics; the information is focused on helping you make decisions and take actions to help you now and in the future. Please visit our Events & Seminars page to register for our on-demand webinars.