by Zack Friedman
April 16, 2020
by Zack Friedman
April 16, 2020
Here’s what you need to know about Coronavirus's impact on your finances — and what to do about it.
How can coronavirus affect my income? It depends. If you’re a salaried employee, for example, you’re less likely to face direct economic pressure. However, if you’re a part-time employee or earn sales commissions, your paycheck could be affected. The global ripple effect on your money has already taken place. Conferences, events, concerts, and meetings have been canceled or postponed. Think of the ripple effect. Less face-to-face networking could hurt future deals. Canceled or postponed concerts hurts nearby hotels and restaurants. Flight and hotel cancellations hurts tourism, which hurts local businesses and means less tax revenue for the local government. Should you panic? No. You should calmly assess the financial implications if any, that coronavirus can have on your income and employment, even if only a temporary lull (or something potentially longer).
The stock market has been decimated from a high of near 30,000 last month to hovering around 24,500 today. There are many schools of thought on what caused the market pullback. Some say it’s a direct result of fear about the coronavirus. When fear subsidies, they argue, the market will continue to rise. Others say the price drop is due to underlying concerns about the economy, and coronavirus was just the catalyst. They believe that the market may not rebound so quickly, and could have an additional downside. No matter what you believe about the stock market and the economy, now is a good time to assess your stock portfolio. Don’t give in to fear and make irrational decisions. Be thoughtful about what makes sense for your individual financial situation and goals. There’s no universal approach. Maybe you ride it out. Maybe you get out completely. Maybe you sell some. Maybe you buy more. Evaluate your risk tolerance, appetite for volatility, near-term and long-term cash needs, and investment horizon. Then, take appropriate action.
The Federal Reserve cut interest rates another 50 basis points, and 30-year mortgage rates have dropped again to their lowest level on record. If you have a mortgage, now is a great time to refinance your mortgage. The average 30-year fixed mortgage is less than 3.5%. If you want to pay off your mortgage faster, you can consider a 15-year mortgage. The monthly payments will be higher, but you’ll save money in total interest payments.
The stock market pullback is a good reminder that you need an emergency fund. Ideally, you need three months of expenses (and preferably at least six to nine months or longer). Start small. Five dollars in a jar today. Whether it’s an unforeseen medical expense, home repair, or unemployment, you never know when an emergency will strike. Start building that foundation today.
Interest rate cuts can lower your variable interest rate credit card debt, which can save you some money. However, if you have credit card debt, don’t use a credit card again until you pay off that debt. You have two options to pay off credit card debt: transfer your debt balance to a 0% APR credit card so you have a longer period to pay off your credit card debt. Or, consolidate your credit card debt with a fixed rate personal loan so you won’t face higher variable interest rates.
Interest rate cuts also mean you can save even more money on your student loans. Student loan refinancing rates have dropped to as low as 1.89%. If you want to lock in lower rates, you can refinance your student loans. Even if you already refinanced before, there are no fees and no limit to the number of times you can refinance.
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