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Managing debt, bills, and monthly payments is already a difficult task. And keeping a budget while facing the economic, mental and physical challenges of the COVID-19 pandemic can feel monumental. Since the pandemic started, close to 40 million Americans have lost their jobs. With unemployment comes difficult choices like prioritizing the monthly bills and expenses, not to mention debt from credit cards, mortgages and auto loans.
A 2019 study showed that 70% of participants had less than $1,000 in their savings account. Most of the participants reported living paycheck to paycheck, unable to save a portion of their monthly income after they paid the bills.
With all this in mind, managing your debts can feel like an impossible task. However, by taking some time to plan and prioritize, you can ensure that you’re making the most of the money that’s coming in and going out each month.
To start, having a physical count of your essential monthly bills will give you a better picture of what needs to be managed first. Collect all your bills on a list, from student loans to your monthly utilities.
On this list, be sure to figure out how much money you need for necessities like food, gas, and medicine. Doing so will allow you to get a better picture of what your financial situation looks like.
Next, you should decide which bills will immediately affect you and your family due to non payment. These are usually debts that are directly tied to physical assets, like your house and car. If you were to avoid paying off these debts, you might face repossession. These are the types of debts you will want to consider allocating money towards first.
During the pandemic, many companies have created special programs to help alleviate the financial strain that American families are facing. Reach out to the companies that you owe money to and see if there is such a program that you can enroll in. This might mean taking on lower monthly bills or deferred payments altogether. Above all else, make sure to get any changes you make in writing for your records.
One of the more difficult payments to keep up with during the pandemic is mortgage payments. As a result, many Americans are simply unable to prioritize these debts.
To combat this, the Consumer Financial Protection Bureau has created a guide to coronavirus mortgage relief. Contact your lender to see what options are available to you.
Car payments come first
Auto loans are one of the more crucial payments to keep up on. If you miss a payment or default on your loan it will negatively impact your credit report for up to seven years.
Many lenders have announced payment deferrals during the pandemic that differ from company to company. Be sure to check in on your auto loan lender to see what is possible.
Alongside auto loan and mortgage lenders, credit card companies have also been helping during the pandemic. Contact your credit card company to see if it is possible to skip a monthly payment or possibly lower your annual percentage rate (APR).
Any amount you can redirect to your prioritized debts will help, so be sure to see what is possible for your credit card debt.
The importance of being able to pay off debt without sacrificing extra money cannot be understated during a pandemic. If you are facing significant debt, the Debt Free Life program can help.
Debt Free Life uses the cash value of a life insurance policy to tackle your debts. This program allows you to pay down your debts on a timeline that works best for you. Even better, any money that remains after your debts are paid off goes towards your retirement savings.
Using a life insurance policy to pay off your debts means your loved ones are financially protected should you pass away, become disabled, or become critically ill. This means you will have the peace of mind that comes with life insurance all while paying off debt and saving for retirement.