You’ve always got a next best step

The Georgia Recorder platform I have today gives me an opportunity to pay forward some good advice from my past: When you’re in a personal financial crisis, there’s always a next best step.

I absorbed that advice — and saw it work — during the Great Recession, when I was communications manager for the nation’s second-largest nonprofit credit counseling agency.

Yet that next step seems even harder today. Income and livelihoods that seemed secure just a month ago have simply evaporated. U.S. employers shed 16.8 million workers in little more than the last three weeks, surpassing the depths of the 2007-2009 downturn. As bad as job losses were during the Great Recession, it took two years for 8.6 million Americans to lose their jobs during the mortgage crisis.

Companies across all sectors are shedding Georgia workers at a head-snapping rate, with more than 390,000 new unemployment claims filed during the week ending April 4. By comparison, the Great Recession eroded the economy slowly, unless you were working in financial services or real estate.

This time the daily life of every American is disrupted by the COVID-19 public health crisis, and the resulting financial carnage has been so swift and widespread that the federal government is racing to deliver aid packages on a scale that would have been inconceivable a decade ago.

Still, it’s time to put one foot in front of the other, because when you are in a personal financial crisis, time is not on your side. The next best step for you depends on your situation.

Have you lost your job or been furloughed? Get free guidance from a nonprofit counselor certified by the National Foundation for Credit Counseling. They’re the experts, and their mortgage counselors are certified by the U.S. Department of Housing and Urban Development. Those certified nonprofit counselors (and beware of the for-profit posers out there) can help you make smart decisions about which bills to pay first: rent, utilities or credit cards.

They offer personalized counseling online or over the phone. Based on my experience working at Consumer Credit Counseling Service of Greater Atlanta, this is some of the advice you’ll hear:

• Scour your monthly budget for leaks and plug them. Seize control by accounting for where the money goes each month and setting priorities: a roof over your head, electricity that works and food in the pantry. Often the next essential on the list is transportation, but if you can get out from under a monthly car payment by selling your car, you might be better off — especially if potential employers will want you to work from home. Sadly, in the current crisis, many of the go-to spending cuts credit counselors typically recommend don’t apply. You probably already have scaled back dining out and buying clothes.
• Exhaust ideas to generate income before tapping your retirement savings. You’ll be tempted by some aspects of the recently passed federal CARES Act, which forgives some tax penalties for taking money out of your workplace retirement plan or IRA because of the current crisis. The CARES Act also increases the amount you can withdraw. But beware: This should be a last resort, even with concessions. When you tap retirement savings, you are subtracting from your future financial wellbeing. Can you find other ways to bring in enough income to get by while looking for a job?

Is your income secure for now? Your next best step is to fortify yourself against financial changes that you can’t foresee and may not be able to control. None of us know how long this COVID-19 outbreak will last. All the mixed messages from our political leaders signal the same thing: Nobody knows how bad things are going to get. So, for those of you with the ability to save and plan, let me channel my former credit counseling colleagues and offer a suggestion.

• Build or maintain your emergency fund and match it to the scale of the financial threat. In good economic times financial counselors suggest setting aside enough cash to get your household through three months without any income or borrowing. During the Great Recession, the financial literacy educators at Consumer Credit Counseling Service of Greater Atlanta doubled that recommendation to six months of savings. If you are due a tax refund, you can file now and use that to give a quick boost to your emergency safety net, even though the deadline for Georgia and federal taxes is now in July. The same holds for the money most Americans are due to receive soon through the federal stimulus package.

One aspect of this widespread financial crisis is more encouraging than what I saw during the Great Recession. Because so many people need help, the government and lenders are more prepared to give it.

When I signed into my bank account a few days ago, a pop-up window asked if I wanted information about a mortgage payment suspension program. A decade ago, getting that kind of information required desperate homeowners to stay on hold or stand in line for hours. So, maybe we have learned from our past mistakes.

Nobody has a roadmap to navigate this crisis, but you can control how much power you cede to the chaos. No matter what your situation is, taking charge of your finances is always your next best step. And when you string those steps together, you can move from crisis to control.