It’s April 1. Do you know where your bills are?
The battle to thwart the novel coronavirus has hammered the California economy and left many workers and business owners with little cash to pay the bills. The start of a new month signals the first full billing cycle of the crisis with more than 1 million Californians newly unemployed.
Yes, there have been plans announced for stimulus money, bailouts, deferrals and moratoriums. Yes, the federal government will be sending Treasury checks to many households. And if you qualify, there will be unemployment benefits, too – possibly doubled in this crisis thanks to emergency measures.
But none of that legislating has put cash into people’s checkbooks as of right now. And for many Californians, that money will be appreciated, but it’s likely no full solution to the large bills created by the state’s high cost-of-living.
So what should you do as the due dates loom? Let’s look at some tough questions about bill paying in the coronavirus era. And I encourage readers to click the embedded links to see more content on that topic.
Q. Who do I call first?
A. Nobody. You can’t dig yourself out of a hole without knowing how deep it is. So, clear a table in your home, then go find all of the bills. Sort them by the amount and when they are due.
Next, grab the paperwork for all your assets: Bank accounts, retirements funds, and yes, even the mad-money stash. Add it up.
You’ll be better prepared to battle with your creditors if you have an accurate financial snapshot.
Q. Will anybody really work with me?
A. Understand that to be a successful business you can’t have too much empathy when it comes to collecting bills.
Banks, utilities and landlords have heard every tall tale known to mankind about why a bill can’t be paid. Remember, these companies have their own bills to pay, too.
That said, in extraordinary times like these, the companies to which you owe money can be reasonable – even if some of that is due to government mandates. Expect them to listen carefully.
Contact all the folks to whom you owe money. Do it well before the due date. Be honest. Tell them your story. And take good notes about the discussion. Hope for the best.
Q. What’s a deferral?
A. No bill collector that I know of is cutting the money owed. Instead, they’re offering a “deferral” of payment.
That means you get more time to repay the debt, often without late fees or a ding on the credit score. It’s critical to read all the deferral terms — especially when that money must be repaid.
A host of banking institutions and landlords already have instituted payment deferrals for those affected by coronavirus closures or layoffs.
Deferrals can delay imminent financial disaster. Still, three months of deferral could mean four months of payments beginning early this summer.
Q. Should I make my rent payment?
A. You need a roof over your head. That’s the No. 1 need, so act accordingly.
California has mandated a 60-day moratorium on rental evictions. So, if you don’t pay your landlord there’s a pretty good chance you won’t feel any immediate pressure to leave your rental home.
Talk to your landlord, whether they’re a giant real estate firm or mom-and-pop owners. See what they can do. Offer a partial payment as a good-faith statement that you’d like to stay and will eventually repay the balance. Maybe they’ll be generous and shave a bit off the balance. But don’t bet on it.
Landlords will have a tough time evicting you now as the state also banned processing eviction orders. But that protection, as currently stated, will last just two months.
Q. Should I make my mortgage payment?
A. If you can’t make a house payment, call the lender immediately.
Remember, the person who will be handling your distress call will most likely be the loan “servicer,” the company to whom you send your check.
Many mortgage companies are willing to defer payments over the next two or three months. But each lender is very different, so flexibility and terms will vary.
Check on what “deferral” means and how that deferred money will be repaid. There’s a big difference between having it to pay in back in, say, 90 days (that’s stingy) vs. having the skipped payments put on the back of an extended mortgage (that’s generous).
PS: California property taxes are still due April 10.
Q. What about student loans? Car payments? Utilities? Credit cards? Other bills?
A. If your student loan is with the federal government, there’s a six-month deferral available. Call to see if you’re eligible.
There has not been much publicity about deferral plans for bills outside of the housing industry and student loans, but media reports suggest many other creditors are offering assistance to folks with coronavirus-shattered incomes.
Also, check your mail for notices from the auto lender and utility companies.
Again, get on the phone and discuss payment flexibility. If you’re really financially stretched, hard choices may have to be made. That’s why knowing your current financial picture — debts and cash — is essential.
Q. Should I use my retirement funds to pay bills?
A. The federal stimulus package allows for folks in need to access up to $100,000 in retirement funds for extra cash in these tough times. Repayment (you have to put it back or face a big tax bill) has been extended to three years.
Many financial gurus will say that accessing retirement funds is the worst-case/last chance move to make. I (sort of) disagree.
If you had the financial discipline to amass a decent retirement kitty, I’m thinking you have the financial strength to repay this debt to yourself in three years.
And sure, the stock market is down right now, so it looks like a bad time to sell. So, perhaps sell off the fixed income assets — cash or bonds — in your retirement account to fund this withdrawal (or loan).
Remember that having no money is costly. Skipping a retirement account’s potential gains could help you avoid the pain of foreclosure or eviction and/or costly late fees and other surcharges on your unpaid bills. Any damage to your credit history will result in denial of loans and/or costlier options.
Even more importantly, ignoring the pure dollars and sense of it, removing the emotional and psychological burden of a cash shortage can be hugely beneficial
Q. What about my May 1 bills?
A. Live life one bill at a time, but it’s a good bet that the state and much of the nation will be on relative lockdown throughout April. That translates to not much improvement in the suddenly weak job market.
So, if you’re out of work, become the household’s benefit seeker.
Research and track down whatever cash grants, loans, waivers, deferrals are out there to help. Check government sources for aid, nonprofits and even corporate sources. The Small Business Administration is offering disaster loans. And don’t forget food banks.
Also, figure out which household expenditures can be eliminated or trimmed. Cost-cutting can be the best income generator in lean times.
Finally, don’t ignore your family’s mental and physical health. As you keep a sharp eye on your finances, don’t forget that stress is a killer, too.
