I want to start this article by saying I’m not a professional financial advisor. I am an entrepreneur with two small online businesses which I run, two kids and my beautiful wife. Just like you and most people on this planet I am in quarantine right now.
Uncertainty around the pandemic brings stress, anxiety and fear to most people, especially around finances. As a refugee from Soviet Union, fear is something I feel comfortable with for some reason, it’s been instilled in me since an early age. I’ve learned to deal with it in a rational way.
It’s important that we don’t let fear drive our decisions in times like this. We may feel like most things are out of our control right now, but there are a few ways which I am taking back some of the control which I want to share with you. Here are a few things you can do to get through this difficult time:
1. Ask your cable/phone/internet/insurance providers for a discount. My wife has made fun of me for years about this but I’ve done this for as long as I can remember. Every 3-6 months I call up all my providers and simply ask for a discount. I say that I have been a loyal customer and there are many competitors out there and I’d love a better rate. And it works. Just like that I usually get lower and lower bills the longer I stay with a provider. I do this for anything from home insurance to internet and cell phone bills.
2. Buy some Bitcoin on a recurring basis. I am not a crazy bitcoin person, I am not some investor with a lot of money, and I don’t own a lot of Bitcoin at all. Like many of you, I have an IRA and some savings. I just happened to read about Bitcoin and hang out with friends who explained to me that there is a finite amount of Bitcoins out in the world, 21 million coins, and the supply of it cannot be changed. Unlike gold or oil or any resource people can make more of, you can’t make more of these coins. The government cannot print more of this currency. It’s inflation proof. It’s in the top 30 most liquid currencies in the world and there is no paper or coins involved. In my mind I think my kids will be using Bitcoin to make payments and the value of each coin eventually will go up. I don’t have a lot of cash to put into it, but there are sites and apps which allow you to buy as little as $5/mo on a recurring basis.
3. Research government aid options. The $2 trillion aid package from the government has a TON of potential ways for you to benefit from it. I have been using two resources to stay up to date, the IRS coronavirus website with live updates on their decisions/implementation and this Zenefits’s article breaking down all the benefits in the bill for employees and employers. Some of the highlights are: you’re entitled to a stimulus check from the government (if you earn less than $198,000 if married or $99,000 if single), SMBs with less than 500 employees can get a loan guaranteed from the Small Business Association for two months worth of payroll for employees (the loan is forgiven after the two months). Read up on all the benefits and see if you qualify.
4. Defer payment for mortgage or car loans. I recently found in a Fortune article that mortgage giants Fannie Mae and Freddie Mac both have ordered lenders to be more flexible with borrowers, reducing or suspending payments for up to 12 months. That action alone covers half of the country’s home loans. Now in reality many major banks in the U.S. are issuing 90 day grace periods, that’s the most common scenario and there is of course a lot of details and hoops to jump through since this is so rushed. You do need to apply and qualify to get a grace period but it’s worth your time and money to look into this.
5. Get a life insurance policy. Most people do not have a life insurance policy because they misunderstand this product. If you buy a life insurance policy, the premiums act like a savings account which you can withdraw money from for any expenses which come up without penalties or taxes. So essentially, it’s another way for you to save money for retirement or anything which comes up in the future. It’s not stock investing, it’s simply having a stash of savings. In general life insurance gives my family choices by providing the benefits to help pay off debts at times when the market is crashing. It can help meet housing payments and ongoing living expenses, or help fund college educations for your children or grandchildren, and much more. In addition its coverage for long term disability care and life insurance. I think of life insurance as another stash of savings besides my savings account. I can withdraw the funds whenever I need it, all tax free. There is a great overview article on life insurance in The Balance which I refer friends to all the time.
6. Defer paying income taxes. A number of my friends who are sole proprietors or business owners have been comparing the penalty they pay IRS if they defer paying income taxes vs. the mortgage interest payment they make every month. The idea here is that if instead of paying income taxes you put that money towards paying down your mortgage, you could get your mortgage payments significantly lower and repay income taxes later. You just have to be disciplined to make sure you repay the taxes later, that’s the tricky part. Now the IRS just extended the deadline to file taxes from April 15, 2020 to July 15, 2020 and will allow deferred payments due to the pandemic. In most cases the mortgage interest rate people pay is higher than the IRS penalty to pay to defer paying income taxes. So if you are disciplined deferral of paying income taxes to pay down your mortgage might be something you consider. I am the type of person who hates owing money to someone, so I actually overpay my taxes and pay taxes as soon as possible via estimated tax payments. A number of people I do know though use this IRS website to calculate their penalties for not paying income taxes with their accountant and simply compare it to the mortgage payments to see if this makes sense for them.
7. Review your spending. This is an easy one which most of us simply forget to do. We have kids, we are busy, we need a few hours to ourselves when kids go to bed, we have no time to look at our expenses and analyze them. I like to timebox myself to 30 minutes to do this, I simply look through all the expenses for our family for the month starting from big items like mortgage all the way down to what we bought at Amazon. We usually do this together with my wife and we simply discuss if there is stuff we’re buying we don’t really need now. We are not some crazy frugal minimalists, we just forget sometimes that hey maybe that $4 floss which is “so damn good” or that subscription to yet another streaming service because we watched one show on it we don’t really need and it won’t change our lives at all if we quit buying these. I usually find a few things we can discontinue.
8. Be generous. It’s time like this when donating and contributing is what you need to do. Your favorite restaurants, your favorite yoga studio, your favorite local shops, food banks need you most right now. My wife always reminds me that it’s important to help people around you, don’t just think of yourself, think of everyone who is impacted and do the best you can to help others any way you can. It doesn’t matter if you are not using your yoga studio right now, do you want them to be around in a few months? Support them if you can. Every dollar counts.