How To Make An Emergency Fund Last Through A Crisis

I think it’s fair to say that much of America is going through a financial crisis right now.

President Trump was hopeful to get businesses opened up again by Easter, but then he declared an extension of the social distancing guidelines until April 30 and a projection that the country should be in a recovery phase by June 1.

Most people will likely be relying on unemployment for months, which means they’ll have to cover their living expenses with a fraction of what they typically make.

This is when an emergency fund can give your life some stability in the midst of chaos.  The savings you’ve worked so diligently to build up can help you avoid a full-blown financial crisis.

However, nobody knows how long we’ll need to rely on unemployment and savings.  There’s no guarantee when life will get back to normal, especially since we haven’t yet faced the worst of this pandemic.

So, it’s critically important that you manage your emergency fund to make it last as long as possible.  Here are a few strategies to stretch your savings so you don’t run out before life returns to some degree of normalcy.

 

#1  Prioritize expenses

It’s time to buckle down.  Write out a bare-bones budget that accounts for *just* the necessities.  This typically includes housing, food, transportation and health care.  These are your critical budget categories and should be the priority.

Then, make a list of all your debt payments.  This would include your mortgage, car payments, credit card bills, student loans, etc.  Add up the total of the minimum payments for all of your debts.

Do some research to learn the latest financial exceptions put in place by the national and local government.  As this health crisis continues, additional measures will likely be made.  Know what you have a right to as a result of the current circumstances.  Then, call each of your lenders directly so they can help you set up special arrangements for your specific loans.

Everything else is discretionary and therefore optional.  Depending on your financial situation, you’ll need to either completely eliminate or drastically reduce costs in all other areas.  This will mean giving up many of the comforts you currently enjoy, but keep in mind that it’s temporary.

 

#2  Identify all cash sources

Your goal is to increase financial liquidity so you have enough cash available to cover all of your expenses.  Sources of income streams or lump-sum payments could include:

  • unemployment benefits
  • stimulus bill check
  • company bonus
  • personal loan
  • 401k loan
  • savings account
  • investment income
  • refunds on returned merchandise or cancelled reservations
  • sale of possessions no longer needed
  • payment of money you loaned someone else
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Secure these sources as soon as you can.  Don’t wait to ask your boss for a bonus or apply for unemployment.  If someone owes you money, now is the time to ask.  The sooner you can establish all income streams, the better your financial outlook in the coming months.

And if you’re self-employed, collect all balances due from your clients as soon as possible.  As the crisis continues, there may come a time when they’ll be unable to pay.

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#3  Put a hold on investing

Right now, the priority is to save and secure enough cash to support you through this crisis.  This means you may have to suspend your retirement fund contributions and any other investments you normally make.  Remember, this is only a temporary adjustment while we’re going through this global crisis.

What’s important right now is covering your current everyday needs.  Funding your future can wait until life gets back to normal and you’re generating guaranteed income again.

 

#4  Request temporary payment arrangements

Because of the current world health crisis, the American government has allowed for various exceptions concerning loan payments and tax filing.  Many lenders now offer the opportunity to defer payments without penalty or interest.

Stay updated with the latest news about financial relief options from both the national and state governments.  Know what options you’re entitled to before you call your lenders and request financial assistance.

Although federal student loans were given specific exception in the stimulus bill, many mortgage lenders and credit card companies are also extending offers to defer payments.

Also, the federal income tax filing deadline has been extended to July 15.  Check with your state to see if the state tax deadline has also changed.

And finally, if you are struggling to pay your utility bills, call your providers to request temporary payment arrangements.  In my area, our power and natural gas companies have committed to not disrupt service if bills cannot be paid.

 

#5  Negotiate when you can

Now is the time to strengthen your negotiating skills.

Talk to your boss about reducing your hours or your pay temporarily, rather than completely being let go.

Try coming to an agreement with your landlord to lower your rent for a few months.  They probably don’t have many people applying for apartments right now, so working out an arrangement to keep you as a tenant is in both of your best interests.

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Call up your insurance provider and ask for a lower premium.  Many people are probably trying to lower as many expenses as they can right now, which means switching to the lowest insurance rate they can find.  Your insurance company would rather give you a better deal than lose your business.

And call up your credit card lenders, too.  Ask them to lower your interest rate so you can continue to make payments on time.

Things seems really chaotic and unstable right now, but that goes for businesses, too.  As the consumer, you have a unique opportunity to make requests that benefit both you and them right now.

 

#6  Apply for unemployment

Unemployment insurance is a program that provides cash benefits to eligible workers. While each state administers a separate unemployment insurance program, all states follow the same federal guidelines.

There are certain requirements you must meet, but you usually qualify if you lost a job you’ve held for the past few months through no fault of your own.

Unemployment benefits will provide a consistent income stream for you while you’re out of work.  And, new guidelines have been put in place while we’re dealing with this health crisis that offers more flexibility.

So, definitely apply for unemployment benefits, and submit your application as soon as possible.

Right now, America’s unemployment system is overloaded.  The Fed estimates the unemployment rate could hit 32%.  You should secure your benefits sooner rather than later because it takes a few weeks to get your first check.

 

#7  Include other government financial assistance

The recently passed $2 trillion relief bill provides many Americans with financial support.  This includes stimulus payments of up to $1,200 per individual to each American adult.  Also, for every qualifying child under 16 years of age, the payment will be up to $500 more.

The amount you’ll get depends on your income, marital status, and number of children.  You can use a stimulus check calculator to determine how big your check will be.

Also, unemployment benefits have been expanded in order to come closer to fully replacing the average worker’s paycheck.  This looks like an extra $600 per week on top of the state benefit.

Many states currently provide 26 weeks of regular unemployment benefits, and the stimulus bill has added an additional 13 weeks.  The extra $600 payment will last for up to 4 months, covering weeks of unemployment through July 31.

 

#8  Look for opportunities to create income

You may have lost your job, but you still have your skills.  So, be creative and seek out opportunities to offer those skills in exchange for payment.

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Take advantage of the increase in online activity by offering services you can deliver through the internet.  You can meet with customers through Zoom or Skype, and promote your business through social media.

And now is a great time to learn new skills or sharpen the ones you have.  Use sites like YouTube, Coursera and Skillshare to explore areas you’re interested in.  Consider turning your hobby into an income.

While we’re all under a stay-at-home order, might as well make the most of it and teach ourselves new skills that will make us even more employable once things get back to normal.

 

#9  Don’t stop saving

One of the best financial habits you can develop is to live on less than you earn.  And there’s never been a better time than now to put that into practice.

Even when money is tight, it’s still critical to save.  Keep adding to your emergency fund, whether you’re using it now or not.

Nobody knows how long life will be like this, so don’t count on a set timeline.  Continue to build your savings so you don’t run out before your income becomes more stable.

 

#10  Take care of yourself

The sooner we can flatten the curve, the faster life can get back to normal.

So, take care of yourself.  Follow the COVID-19 official guidelines for social distancing.  Keep washing your hands, staying at home, and avoiding public places.  This is the most critical way you can protect yourself and prevent this horrible virus from spreading.

The last thing you want is to get sick and add more stress to your situation.  You need to stay healthy for you, your family, and your future.  Do what you can to prevent adding medical bills to your financial obligations.

 

You’ve got what it takes

We’ll get through this, that’s for certain.  But, for now, we have to be flexible.  We have to make inconvenient choices.  And we have to focus on what we can control instead of all the chaos around us.

So, plan for the worst but hope for the best.  You can do it.  You’ve got everything you need to figure it out.

And I’m betting we’ll come out the other side stronger than we’ve ever been.

 

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