Financial Moves to Consider During the COVID-19 Pandemic
The COVID-19 outbreak has spurred an economic crisis as well as a health-related one. Millions of Americans are now unemployed, frightened, and wondering how they’ll pay their bills in the coming weeks or months. And while it’s a scary time to be living through, there are a few moves you can make to protect yourself financially.
- Boost Your Emergency Fund (if possible) – Having emergency savings is crucial at all times, but it’s especially important during periods like this, when unemployment is rampant and economic uncertainty abounds. A solid emergency fund is one with enough money to cover three to six months of essential living expenses, and right now, it certainly wouldn’t hurt to hit the higher end of that range. If you’re still working, use your paycheck to pad your savings — especially if you don’t have three months of expenses in the bank.
- Leave Your Stock Portfolio Alone – The stock market has been swinging lately, and while it may be tempting to cash out investments to avoid further losses, doing so will only lock in any losses you’re already looking at. Rather than go that route, remind yourself that if you sit back and ride things out, the stock market is likely to recover in time. That said, you don’t have to leave your stock portfolio alone if what you’re doing is buying more stocks. Now’s a great time to invest in quality companies whose stock is on sale, so if you’re good on the emergency savings front, you can use your spare cash to add to or diversify your portfolio.
- Keep Putting Money Away For Retirement – When the prospect of unemployment looms over you, you may not give a hoot about what your finances will look like 20, 30, or 40 years from now. But just as now’s a good time to add to your stock portfolio, so too is it a good time to keep funding your 401(k) or IRA, provided you’re financially able to do so. The money you invest in that account now can be used to score discounted investments that could grow exponentially over time.
- Apply For a Home Equity Line of Credit – Even if you’re still working today, you never know whether the ongoing crisis will force you out of a job. And if you’re already unemployed, it could take quite a long time to secure a paycheck again. As such, having access to extra money is crucial, so if you’re low on emergency savings but own a home, it could pay to apply for a home equity line of credit. That way, you’re not borrowing money you immediately accrue interest on, as would be the case with a home equity loan. Rather, you’re giving yourself the option to borrow as you need to.
A final thought: The most important thing to do now is take a deep breath and resist the urge to panic. Panic leads to irrational thinking, which leads to poor financial decisions. The COVID-19 pandemic is a terrible and frightening situation. There’s uncertainty surrounding how long the outbreak will last, how bad it will get, and many other variables. But we will get through it. So make some smart and rational financial decisions and focus on what’s really important — your health and the health of the people you care about.
Works Cited
Backman, Maurie. “5 Smart Financial Moves to Make During the COVID-19 Outbreak.” The Motley Fool, 7 Apr. 2020, www.fool.com/retirement/2020/04/07/5-smart-financial-moves-to-make-during-the-covid-1.aspx. Accessed 7 May 2020.
“Coronavirus and Your Finances: Here’s How to React.” The Ascent, 13 Mar. 2020, www.fool.com/the-ascent/banks/articles/coronavirus-finances-how-to-react/.
HR Compliance Bulletin: IRS Issues Guidance on Tax Credits for Coronavirus Paid Leave
Small and midsize employers may begin using two new refundable payroll tax credits to obtain reimbursement for the costs of providing coronavirus-related leave to their employees, the U.S. Department of Labor (DOL) and Internal Revenue Service (IRS) announced on March 20, 2020.
This relief is provided under the Families First Coronavirus Response Act (the Act), which was enacted on March 18, 2020. The Act provides funds for employers with fewer than 500 employees to provide paid leave, either for their employees’ own health needs or to care for their family members. The Act aims to help employers keep workers on their payrolls while ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the coronavirus (COVID-19).
This Compliance Bulletin provides the DOL and IRS’ guidance.
HR Compliance Bulletin: Guidance on Tax Credits for Coronavirus Paid Leave
If you have any questions or would like additional information please contact our office at 617-723-0700.
Risk Management During the COVID-19 Pandemic
Most of us are now working from home, but everyone at Cleary Insurance is still available to assist you with your insurance and risk management needs, as are all the insurance carriers we represent. We will still meet with you if required, but we strongly encourage all communication to be via email or telephone.
In this past week, we have fielded many inquiries from our clients, and the areas of greatest concern appear to be the following:
- Health Insurance: routine doctor and dentist office visits have all been cancelled or postponed, as has any elective or non-emergency surgery. This is being done both to stem the spread of the coronavirus, and to prepare for the anticipated need for hospitals to adequately respond to patients with COVID 19. Health insurance carriers have also eliminated co-pays, deductibles, and co-insurance for all coronavirus related testing, procedures, and treatments.
- Loss of Income/Business Interruption Insurance: Many clients have asked if this coverage applies to the current pandemic, and the unfortunate answer is no. Lawsuits are being filed in New Orleans, legislation has been introduced in New Jersey, and industry associations are lobbying Congress to pass Terrorism-like insurance relief funds, but as of now, there is no such coverage available.
- Cyber Liability: In the past three months, over 4,000 domain names have been registered with the terms “Corona” or “Covid”. Hackers will be looking to exploit employees working from home with phishing emails, knowing that new procedures at work, combined with improper (or non-existent) firewalls, will provide easy prey for these scams. Please be vigilant and on the lookout for such fraudulent emails.
- Workers Compensation: Workers Compensation cases relating to COVID 19 illness will be determined on a case to case basis. A worker becoming sick from the flu is not typically covered under Workers Compensation. In order to be covered, it must be demonstrated that the illness was contracted as a direct result of employment, with a greater risk than that from the general public. A health worker treating flu patients could fall into this category, but such would not apply to most occupations.
As always, we welcome your questions, emails, and calls. We will also be updating our postings to make sure that we provide the best risk management advice to our clients during these turbulent and unnerving times.