Given the economic impacts brought on by COVID – 19, we feel it's especially important to be proactive with our spending and cash savings to reduce the impact of lower income from becoming disastrous. The following are some ideas to consider to stay on the plus side:
- Minimum Payments – You may be accustomed to paying your credit cards off in full each month however, it may be necessary given the job situation and your circumstances if out of work to reduce your payments. You will want to at least to the minimum required if possible. If you cannot make minimum payments, credit counselors suggest calling your credit card company to try to make some arrangements to pay. Otherwise, you may incur immediate fees from your creditor, and you run the risk of your debt being sold to a collection agency and running your credit.
- Interest rates – Unfortunately, you will incur higher interest rates if unable to pay the entire credit bill monthly. Again, if this happens contact your creditor to ask for a lower interest rate. If you are making some payments your creditor may be willing to negotiate a better rate, especially given the COVID – 19 circumstances.
- Selecting a credit card – If you have a choice, you should always use a credit card that has the most favorable interest rates and/or charges. If you have credit cards on which you carry a balance each month, trying to consolidate them because you incur interest charges on each credit card not paid off. Take advantage of offers to consolidate credit cards without charges and to defer interest on that debt for a time.
- Prior purchases – Many of us make large purchases such as furniture, appliance, and even healthcare from companies that offer “free credit”, provided you pay the outstanding balances in full by the end of the stipulated time. If you fail to make the balance in full by the stipulated date you may incur high interest fees perhaps as high as 29% to 36%, calculated from the date of the initial purchase. You should make it a priority to pay these balances in full by the end of the specified time. It is even more important to pay off these balances than other credit cards because you may have backdated interest charges.
We want to remind you of prior discussions of our "three boxes" of savings:
- Short-Term savings for emergencies such as times like these it's prudent to save up to 3-6 months of living expenses.
- Mid-Term savings for larger major purchases on the horizon of 3-5+ years, and
- Long-term savings to help cover daily bills once retired and supplement your retirement income.
Please don't hesitate to give us a call to set up a time to chat via Zoom or phone to discuss your overall savings plan. Remember, it's never to late to plan!
This is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions.