Strategies to Manage Your Money and Reduce Financial Anxiety During This Crisis + Tips on How to Save, Budget, and Plan for a Recession and a Layoff

Handling your finances can be challenging at the best of times, but what happens when you are in the midst of a pandemic? How do you keep your money safe when the world around you is in a state of flux?

In this week’s blog and podcast, I speak with financial expert Chris Hogan on strategies to manage your finances and reduce money anxieties during this crisis, as well as helpful tips on how to save, budget, and plan for a recession or a layoff.

Right now, everyday life is being quarantined, including the economy. The stock market is a living, breathing thing: it reflects what is going on around us, and right now is it reflecting a lot of fear, uncertainty and concern. This means that we all need to make some serious decisions when it comes to our money. As Chris says, we should acknowledge this uncertainty, not ignore it or hope it goes away, while keeping a straight head on our shoulders. We have gotten through major crises before, including 9/11, the SARS outbreak and the Great Depression, and we will get through this. We will see the other side.

What we see on the other side, however, is partly up to us. We need to make decisions now, taking all necessary precautions, so we make it through this time of uncertainty with as little damage as possible. We need to control the controllables, as Chris says, while acknowledging that many things are out of our hands. Indeed, despite the turmoil around us, we can control our attitude, our outlook and our actions. We are the masters of our emotional state and our financial situation.

What are some ways we can do this?

1. Keep your money in the bank. Remember, this is not a banking crisis; this is a pandemic, so there is no need to rush to the bank and withdraw all your money. In fact, all bank accounts are insured up to $250 000 by the federal government, and you will still be able get your money out even if the economic situation gets worse. However, if you have more than $250 000 in a single account it may be good to speak to an expert and put your money in a different bank account, so that it remains insured.

2. Don’t freak out about your 401k. Investments are like riding a rollercoaster, there are ups and there are downs, so you should have a long-term plan in place (ideally, you invest for 5 years or longer). Yes, the “rollercoaster” is going down right now, but it will come back up again, so don’t jump off just yet! If you do, your losses will be final, and you will stop your money from growing. Just tighten your seatbelt and keep on keeping on.

It may also be helpful to talk to an investment professional about your risk tolerance, and figure out what you are comfortable with when it comes to investing (Chris recommends investing around 15% of your income). Market volatility is part of life, and what does down will come back up again. Consistency in the market comes from dealing with both the ups and downs—when the market goes down, you get things on “sale”, and when the market comes back up again, you profit.

3. Avoid putting all your financial eggs in one basket. Diversification is key when it comes to your financial portfolio, so speak to your financial expert/investment professional about spreading things around.

4. Go into conserve mode. At the moment, we are not sure if this pandemic will result in a recession—only time will tell. However, it is a good idea to we should go into defense mode, that is have a fully-funded emergency fund in a savings account that covers your living expenses and basic needs for 3 to 6 months, while avoiding unnecessary spending or buying.

5. Recognize that debt is a threat. Yes, interest rates are low right now because the government wants to boost consumer spending, but avoid taking on too much debt if you can, which can seriously impact your financial, mental and physical health in the future.

6. Refinance your mortgage if you can. Since interest rates are so low right now, it may be a good idea to speak to your lender and refinance your mortgage, but only if you can get a fixed rate mortgage, preferably for 15 years. This will help you avoid the volatility of adjustable rates, and you will always know what your payments will be.

7. Prepare for possible layoffs. Unfortunately, many people have been laid off or are facing the possibility of losing their job right now. This is tragic, and we have a collective responsibility to help people where we can, and be generous with our time, talent and money. We should all constantly be checking in with the people we care about and looking for opportunities to help others, because we are all in this together.

If you currently find yourself in this situation, remember that this too shall pass. You will get through this. Conserve what you can, only spending money on what you really need (that is basic clothing, food, transportation and housing needs). Call your creditors and be honest about your situation, letting them know what you can and cannot pay. Sell whatever you can sell. Look for a job, even if it is not something you want to do, just so you can get some money coming in—ask friends, family members, former coworkers and anyone else you know. Don’t give up! When this crisis calms down, you can start looking for a job you really want, but, right now, focus on what you can do to support yourself and those you love.

8. Support small business owners, as they are the backbone of the economy. Yes, you should go into conserve mode, but that doesn’t mean you have to stop supporting local businesses, which need us all now more than ever. Focus on the necessities, that is clothing (but only what you need!), food (yes, the restaurants are closed but many are still open for take-out or pickup, and many also have gift cards you can buy!), transportation and housing, and see what the small businesses in your area can offer you.

9. Find a financial expert who supports your goals and dreams. The best financial professional is someone who has the heart of a teacher: they are looking to help you get where you want to go. They are not just looking to make money; they want to teach you, so that you can learn and grow.

This is all fine and great for individuals, but what if you are a small business owner? How do you survive the current economic crisis?

1. Like individuals, business should go into conserve mode, spending smartly and storing up what revenue they can. 

2. Communicate! People are fearful of the unknown, and things can get scarier when they don’t understand what is happening, so communicate openly and honestly with your team. Talk to people you trust who support you or other small business owners, and come up with ways to deal with the current crisis. Remember, you are not alone! We are built and designed for community.

You should also talk to your creditors or vendors. Be honest about your situation, and discuss ways you can extend payments that are due so you keep holding onto what cash you do have. If you have debt, be proactive: call your creditors and let them know that your payments will be late, or that you can only pay a percentage of what you owe right now (paying something is better than nothing!), documenting all your communication. This may be uncomfortable, and people may get angry at you, but it puts you in control of what you can control.

For more information on finances and COVID-19, listen to my podcast with Chris (episode #142), check out his website,podcast, Facebook, Instagram, Twitter and YouTube. If you enjoy listening to my podcast please consider leaving a 5-star review and subscribing! And keep sharing episodes with friends and family, and on social media (don’t forget to tag me so I can see your posts!).

Podcast Time Highlights

2:05 Why is the economy being quarantined?

2:32 The stock market is a living thing

3:26 How to control the controllables

4:08 Are the banks safe?

5:06 401Ks and the investment rollercoaster

6:18 Why you shouldn’t have all your eggs in one basket

6:41 What can we do if there is a recession?

7:58 Why is everyone talking about interest rates?

8:57 Is there any hope for small business owners?

12:00 Debt is a threat

15:12 How can I support small business owners?

16:14 What can you do if you have been laid off?

19:57 How do you deal with market volatility?

23:22 Should you refinance your mortgage? 

25:18 Who can you trust when it comes to financial advice?

Dr. Leaf no longer runs a private practice or takes individual patients. If you are looking for a therapist we recommend BetterHelp, an online counseling platform that offers affordable and accessible mental health care tailored to your individual needs. Visit our sponsor here https://betterhelp.com/drleaf for more details and to find a therapist. 

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