How to survive during bleak times
The coronavirus health pandemic has become a full-fledged financial pandemic. Already, tens of thousands of workers are being laid off, especially in the airline, hotel and hospitality sectors.
The situation became acute when thousands of laid off workers crashed unemployment websites in several states.
Economists believe that virus-related job losses could soar to 3 million by this summer, according to an estimate from the Economic Policy Institute, and the unemployment rate will likely to peak at 6% to 8%. (As a point of reference, the unemployment rate peaked at 10% during the Great Recession, with nearly 9 million jobs lost.)
What makes this situation so scary is the suddenness with which it enveloped us. The economy essentially came to a dead stop in March and is probably about to enter -- if it is not already in -- a recession. The question now is how long will it last and how deep will it be?
JPMorgan Chase is forecasting that the U.S. economy will shrink by 14% in the second quarter. If so, that would be far worse than the worst quarter of the last recession, when in the final three months of 2008, the economy contracted by 8.9%.
Other economists are not as downbeat, with estimates ranging from a drop of 5% to 8% in Q2, followed by a less severe fall off of 2 to 4 percent.
Of course, these are just early estimates, but you get the gist: Things are going to get ugly -- and fast. When the dark times loom, it's best to get back to basics. Start by assessing what's coming in and more importantly, what's going out. Typical expenses on this list should include: food, shelter, utilities, car payment, insurance, medical/pharmaceutical expenses, dependent care costs and debt payments (student loans, credit cards, etc.)
Paying for food and shelter should come first. After that, everything is up for grabs. Several cities and states are banning utility shutoffs during this national emergency, so you may not have to worry if you are late and/or can't pay that expense. Additionally, many Internet service providers are suspending data caps, waiving fees and have committed to not disconnecting service to those who can't pay their bills because of the coronavirus outbreak.
As far as debt, the FDIC issued a statement "encouraging financial firms to take prudent steps to assist customers and communities affected" by coronavirus by:
--Waiving certain fees, such as ATM fees, overdraft fees, and late payment fees on credit cards and other loans.
--Increasing credit card limits for creditworthy borrowers.
--Offering payment accommodations, such as allowing borrowers to defer or skip some payments or extending the payment due date.
The FDIC also suggests that financial institutions "work with all borrowers, especially borrowers from industry sectors particularly vulnerable to the volatility in the current economic environment and small businesses and independent contractors that are reliant on affected industries."
The key is that you have to let them know that you are one of those who might be impacted. Instead of hiding, be honest with lenders and companies that you deal with and see if they might modify the terms on existing loans so that you have a little breathing room.
Try not to tap retirement accounts and preserve the money in your savings, because we don't know how long this will last.
(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at firstname.lastname@example.org. Check her website at www.jillonmoney.com)(c) 2020 TRIBUNE CONTENT AGENCY, LLC