When you're having trouble making ends meet, there are three basic things you can do: increase your income, reduce your costs, or go into debt.
If you are one of the 33.5 million Americans who have lost their job, increasing your income is not an option at this time. While unemployment compensation can help you stay afloat for a while, you can't trust it for the long haul, either.
So, if you can't increase your income right now, you should lean on the remaining two options: reduce your expenses or accumulate debts. There are clever ways to do the latter, and we'll cover them in future articles. But today, we will cover how to cut your expenses so that they cause the least amount of pain. It may be easier than you think.
Straighten your life: car, home, entertainment
People tend to spend most of their money in three main areas: automobiles, housing costs, and entertainment. If you're going to cut your expenses, you'll want to see those categories first, as that's where you're likely to get the most out of a cut.
Let's start with your car. If you're not using it as much as you used to, now that you're no longer traveling, you may be able to cut your car insurance costs with a quick phone call. And yes, it can really be fast.
So here is your first task: Set aside 10 minutes today, not tomorrow, today, to find your car insurance information (it's probably in the glove compartment of your car) and call your insurance company or agent. Tell him you drive less now and ask what options are available to lower your premiums.
"You can save 5% to 10%," explains Dan Karr, CEO of ValChoice, a data analysis company that acts as a gatekeeper for the insurance industry.
Some companies will also allow you to change your annual mileage estimates, although they may require that you install an application or mobile device to measure the miles traveled. But, says Karr, "a reduction from 12,000 miles per year to 3,000 miles per year should generate approximately 25% savings."
Also, some insurance companies are offering premium rebates, so while you are talking to your insurance company or agent, ask if there are any credits or rebates that you can benefit from. And if a lowered premium is even more than your budget can handle right now, request that your payments be deferred, which is an option offered by some insurance companies.
But be careful, because unlike a refund, deferring payments means that you will still owe the money in the future. "Drivers must make sure they can pay when the payment is due," says Karr. "Some insurance companies will increase the price of insurance when there is more than one late payment, so drivers should make sure they don't end up in this situation."
Do you want to save even more money on your car? Consider making a second phone call to your financing agency and requesting to defer payments on your car loan, or even refinance the loan. Since interest rates have plummeted in the past few months, you may be able to get a lower rate than you currently have, and also extend the life of the loan at the same time, which will further reduce your payments.
Let's be frank: It will take more than 10 minutes to refinance your car loan, and you may have trouble doing so if you currently have no income. So, use your first 10 minutes to cut your car insurance payment, then come back to the car loan issue when you have more time to explore it.
Reduce your rent or mortgage payments
Fewer people are expected to be able to pay their rent this month, and homeowners anticipate that the situation will worsen with the passing of summer. While you may not be able to pay the rent right now, there are better ways to handle the situation than simply not sending the rent check and ignoring the landlord and hoping he or she will forget it (tip: that's not likely to happen ).
Instead, take another 10 minutes to contact your landlord to explain your situation and offer to pay a portion of your rent for the next few months. Offering even a partial rent can go a long way for some homeowners, as it shows an effort to at least make some kind of payment.
Don't just ask for a month. Request a rent reduction for the next few months, so you don't have to go back and try to negotiate a new rent every month. Start with a low offer and let your landlord offer you a higher figure if necessary. If your landlord refuses to give you any rent reduction, suggest that you pay a lower rate now and pay some of the missing rent later.
Once you reach an agreement, put it in writing. Sending an email to your landlord with the agreed terms after texting or talking on the phone will be extremely helpful in the future if there is a disagreement.
And if your landlord isn't willing to compromise, that doesn't mean you can be evicted right away. Several states have temporary eviction moratoriums, and even when they end, the landlord must go through a legal process to begin your eviction. Knowing your rights and having documentation of your disclosure efforts to your landlord will be useful in any case.
If you own your home, you can call your mortgage broker and request that your monthly payments be deferred. This is called an "indulgence," and homeowners can get a leniency of up to a year thanks to the CARES Act that Congress passed in March.
The good news is that, in accordance with the CARES Law, if your mortgage qualifies for this assumption, not only do you not have to make your mortgage payments for one year, but you also will not accumulate any additional interest or fees on your loan during that period. period.
The bad news is that you will still have to make those payments eventually, they are not forgiven. Some banks are even adding them at the end of the tolerance period as a lump sum, which would leave you with a huge bill in perhaps just a year or several months from now.
But like everything, it can be negotiable. "Tolerance is not unique to everyone, and there are different payment options," says Viral Shah, head of financial products for Better.com, a direct mortgage lender. "Homeowners should ask their lenders about different forms of repayment plans, including a loan modification, such as keeping monthly payments consistent and adding the borrower's missed payments to the end of the mortgage."
Even a lump sum tolerance is probably better than default on your payments now. Therefore, call or contact your bank online and see what they can offer.
Finally, you can consider refinancing your mortgage and reducing your monthly payment that way. "Homeowners can potentially save hundreds of dollars a month by refinancing now," says Shah. "The cost of borrowing has never been cheaper for homeowners as 30-year rates have plummeted to a record low."
You could even get cash for your property at the same time. "A cash refinance is a way to refinance your mortgage and take advantage of the net value of your home," Shah explains. “With a cash refinance, you will get cash after closing. The loan generally has a fixed rate, unlike a home equity line of credit, which often has a variable rate. ”
But a mortgage refinance is definitely not a short process: the average time it takes in the mortgage industry from application to closing is 42 days. You will also need to be able to show a stable income to qualify, which may be impossible if you have recently lost your job. So stick with the tolerance options if you need to cut your expenses fast.
Get rid of those hidden entertainment costs
You probably think that since many shops and stores are closed, you have already reduced your entertainment expenses. And that is undoubtedly true. But there are a number of costs that may still be lurking in your budget.
Here's the third of your 10-minute tasks: look at your credit and debit card statement and find all those little annoying monthly subscription fees. Can you live a while without spending $ 13 a month on Birchbox or $ 1.99 on Microsoft's OneDrive? And do you really need a delivery of new socks every month?
Those little monthly costs add up, and there's a good chance you're not actively using them all. Cancel them now, and you can always restart them once the economy improves. Many companies may even offer bonuses in the future to capture customers who have left.
And while we're talking about subscriptions, now is the time to look at that monthly cable or satellite bill. Even if you're not going to give up your TV subscription to spend time at home, these companies are often willing to cut your bill if they let you know that you're not in a position to continue paying such a high monthly fee.
This concept can also be extended to other industries. For example, if you are paying $ 95 each year for a travel credit card but cannot travel right now, call your issuer when the annual fee expires and explain that you cannot take advantage of the card. Often you will find that your issuer is willing to waive the annual fee or leave some additional points or miles on your account.
Focus first on these three broad expense categories
It may be easier to temporarily cut expenses in larger areas of your budget; you are more likely to make more savings for the time you spend on it. But even small savings can add up if you're cutting recurring monthly expenses like car insurance now that you're no longer driving as much or subscriptions you no longer use.
So focus on your car, home and entertainment costs first, and find money you can save in those areas before you worry about other categories. Just keep in mind if you're really getting a permanent sale or just delaying payment for another day. Both of these are potentially wise measures to help you get through the current crisis, just don't be surprised if a big bill will come later in the second case.
Note: The above prices reflect the price at the time of article posting.