MARKET VOLATILITY, SKYROCKETING unemployment and uncertainty about how long businesses will be shuttered have many individuals and business owners wondering how to manage their financial security.
“Right now, most every business that I know of is in crisis mode, trying to figure out how they’re going to sustain themselves for the next couple weeks before things get back to normal, if they ever do,” said John Zollinger, senior vice president at Home Bank, speaking in early April.
While these are scary times, there are some things both individuals and business owners can do to navigate the current financial landscape.
1. TALK TO YOUR BANK.
“Communicating with your banker is No. 1,” said Jamie Sablich, senior vice president at Fidelity Bank. “Banks in general should be positioned to facilitate our customers’ needs during times just like this.”
Many banks are offering loan deferrals on mortgages, personal loans, business loans,and lines of credit for up to 90 days. In most cases, customers will owe interest, while any principal amount that was due will be tacked onto the end of the loan.
“It’s not a structure that’s going to just kick the can down the road and hit them harder 90 days from now,” says Sablich. “It’s a structure that really will allow them to get to the next 90 days and then, in theory, allow them a minimal amount of payment to get their business back up and running.”
2. DON’T PANIC.
This might seem easier said than done, but Sablich said it’s important to be calm and realistic.
“Everyone is in the same situation — whether you’re 30 years old, 40 years old, we’re all getting hit and the reality is that it’s almost resetting the normal,” Sablich said. “When we come out of this, everybody’s going to be affected in the same manner. We’re all going to have the same challenges and we’re going to have to work collectively to recover from them.”
The sudden roller coaster of the stock market has many people concerned about their retirement investments, which is understandable.
“If you’re a long-term investor, I wouldn’t be worried,” said Zollinger. “Try and design your investments to match your time horizon. The longer you’re out there and the longer you have to retire, the more risk maybe you’re willing to take, so you can be invested in equities.”
If you’re planning to retire in the next couple of years, chances are you’re already invested in funds that are more stable. And while the immediate situation is uncertain, there is some hope long-term.
“The underlying fundamentals of our economy are still very, very strong,” said Sablich. “By no means am I a financial guru or stock analyst, but I do feel that the minute that we get past this COVID-19, most of our net worth through the stock market is going to recover rather rapidly.”
The key takeaway is that now is not the time for drastic or emotional financial decisions.
“It’s really difficult to make decisions in these times,” Zollinger said. “So take your time and think about the pros and cons — really think it through — because if you don’t, you could miss something and really hurt your financial future.”
If your plans for 2020 included buying a home, both Sablich and Zollinger said you don’t necessarily need to put that dream on hold.
“I think the economy needs things like that to continue to happen to keep it moving forward,” said Sablich. “If you have lost your job, you may want to put those things on hold. But if you are one of the fortunate ones where your immediate source of income isn’t in jeopardy, I would recommend [buying a home].”
Zollinger agreed.
“Interest rates are at an all-time low,” he said. “If you can find the right rate and you find the right house for you, I would say it’s a good time to buy.”
3. TAKE ADVANTAGE OF FEDERAL RELIEF.
The CARES (Coronavirus Aid Relief and Economic) Act, passed by the federal government in late March, contains economic provisions to help individuals and small-business owners.
Kathryn Pittman, an associate tax director at Postlethwaite & Netterville — a Louisiana-based accounting and business advisory firm — said the main relief for individuals in the CARES Act is what the bill calls a “recovery rebate.”
In an additional piece of good news, the $1,200 for qualifying individuals, plus $500 per qualifying child being provided is tax exempt.
“It’s operating as an advance tax credit for the 2020 year, so it’s like a credit mechanism that the government is giving.”
And while refund checks are getting most of the attention, Pittman advised individuals to also take advantage of any additional unemployment insurance opportunities.
“The [CARES Act] has expanded the availability of unemployment insurance payments,” she said. “Self-employed individuals, and others who might not normally pay into the system should check their eligibility.”
(For more information visit: irs.gov/coronavirus )
4. IF YOU HAVE A SMALL BUSINESS, CHECK OUT THE PAYCHECK PROTECTION PROGRAM.
Another big provision of the CARES Act is relief for small businesses called the Paycheck Protection Program.
The PPP is a loan that small-business owners can apply for through their lender. The loan can be used to cover up to 2.5 times a business’s average monthly payroll costs for eight weeks after the date of origination. Money spent on qualifying expenses — like payroll and existing mortgages or rent — will be eligible for loan forgiveness.
Offering loan forgiveness incentivizes businesses to keep people on payrolls for the immediate future without having to worry about future payback.
“It’s going to allow businesses to make it through this time,” said Pittman, “and then, as the economy recovers, not be as debt-laden as they might be if there wasn’t a forgiveness piece.”
5. TAKE WHATEVER YOU CAN GET.
Rissi Lovern, founder and CEO of BATON Financial Services, advises small-business owners to make sure they understand the requirements of whatever they sign up for but to take advantage of every relief option available, whether it’s personally or for a business.
“Any kind of freeze on interest expense, any kind of freeze on fees, mortgage deferrals — even if you don’t feel you need that in the long run, you may want to take advantage of it,” Lovern said. “For small-business owners, a business is an extension of their personal finances, so I advise taking advantage of as much help as you can to stockpile cash as much as possible.”
