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Coping Financially in Uncertain Times

Becky Smith, Ph.D. FFC ©
Director, MSU Extension Center for Economic Education and Financial Literacy
State Specialist Family Financial Management
Assistant Extension Professor, Community Economic Development
Dept. Agricultural Economics, Mississipp State University
[email protected]

Introduction

Financial Well-Being is defined as having financial security and the freedom of choice in the present and in the future (https://www.consumerfinance.gov/). The economic implications of the “Affordability Crisis” are adding to the already precarious situation many Mississippians find themselves in financially. This toolkit provides information and resources to help individuals and families stabilize and/or improve their financial well-being as they weather loss of income and uncertainty in financial market as well as help consumers protect themselves now and position themselves for a stronger financial future.

Try Not to Freak Out

Be intentional about being calm. The existential threat of economic downturns and financial uncertainty triggers panic and a “scarcity” mindset. When we panic, we tend to lose perspective and focus too narrowly on a problem, often making things worse.  Staying calm and managing stress takes time and effort but will be worth it. When feelings of panic or anxiety set in, take a moment to control your breathing. Take deep breaths and hold them momentarily, giving yourself time for those feelings of panic and anxiety to subside. We can take breaks from the news. We can stretch and move our bodies, eat more healthily, and get plenty of sleep. We can share our feelings and experiences by connecting with friends and family digitally.  Here are additional ways to proactively manage stress https://www.apa.org/topics/stress and anxiety https://www.apa.org/topics/anxiety.

Remember that Our Financial Resources are Just One of our Resources. When we think of “resources,” we often limit ourselves to thinking about our bank accounts and other financial resources. However, our other resources can be utilized to keep us going through tough times, and some can be used to build financial resources. Think about your social network and support systems, your faith, your grit and desire to make it, your ability to adapt, as well as your mental, physical, and spiritual strength. Drawing on our inner and outer resources allows us to take action, which is an essential human need in times of crisis. 

Resource on building a support network: https://www.apa.org/topics/stress/manage-social-support

Talk About It. Even in a good economy, money is a top stressor in our lives (https://www.apa.org/news/press/releases/stress/index). For many people, money is also a taboo topic, so we often avoid dealing with it or we handle money conversations in an unhelpful way. While money disagreements are not the top source of marital conflict, they have been shown to be “more pervasive, problematic, and recurrent, and remained unresolved” (Papp et. Al., 2009). Realizing that each of us has a different “relationship” with money can be a helpful first step in improving communication around money issues. You can begin by asking yourself some of the following questions, while recognizing and appreciating others around you will have had different experiences:

  • What is your “history” with money? How has your “history” developed and changed over time?
  • What are your earliest memories (good and bad) of money as a child? What is your first memory regarding disagreements about money?
  • How did your parents talk about money? How did your parents agree about how to deal with money?

Self-Assessments that help us understand our relationship with money and improve how we communicate about money:

Guidance for talking about money:

https://www.mindmoneybalance.com/blogandvideos/how-to-talk-about-money

Booklets on bills, saving, debt, and credit to help get the money conversations going (can be downloaded for free or booklets ordered for free): https://www.consumerfinance.gov/practitioner-resources/your-money-your-goals/booklets-talk-about-money/

Tips on how to talk with your kids about money: https://www.consumerfinance.gov/consumer-tools/money-as-you-grow/

Remember Your Future Self. While we need to stabilize ourselves and our financial situation in the moment, don’t forget about your future self—we will want to spend money on the things we want in the future, too. Our economy is resilient has rebounded from many recessions. Additionally, there will be more recessions in the future. Using this opportunity to form a habit of saving and build an emergency fund and/or retirement fund will smooth out the sharp corners when income dips in the future. Even if it is a meager amount, keep adding to your emergency fund and retirement fund. Make other cuts first, if possible, or find new income streams. It is the habit of saving that matters, and once income goes back up, increase the size of these deposits. Even if you are not adding a lot, following through on adding to an emergency fund and continuing to contribute to your retirement gives confidence today that you will be ready for the future. This can give you the momentum you need to get through difficult spots today.

Consumer Protection

We need to stay vigilant in protecting ourselves with today’s digital economy. However, it is extra important during times of uncertainty when people are more vulnerable. Remember, if it seems too good to be true, it probably is. Learn more here: https://www.identitytheft.gov/ and here: https://attorneygenerallynnfitch.com/divisions/consumer-protection/ and https://consumer.ftc.gov/scams.

Money Management in Tough Times

Income Drops

When income drops, act sooner rather than later. When we are panicked, we are more likely to make mistakes and sometimes people go into denial. Follow these steps using the resources below to be proactive in keeping your situation from becoming worse:

  1. Create a budget by listing income and monthly bills. Now is the time to think about what can be cut out for a time and find cheaper ways to entertain ourselves. Be careful of spending extra to make yourself feel better through “retail therapy.” Remember that it won’t be forever. 
  2. Use a bill calendar to prioritize monthly bills and when they are due.
  3. Let your creditors know before you miss a payment. Many people find talking to others about their tight financial situations very difficult. Remember that we are all human and in this together. Creditors are more willing to work with borrowers who communicate and demonstrate intentions of paying off debt, even if it takes longer. However, recognize that creditors may only “assist” you for a short period of time.
  4. Build an Emergency Fund while you are paying down debt.
  5. Find new income streams. Use your creativity to find ways to “monetize” your skills with what others would value. Grocery stores, fast food, and delivery services are hiring. Find ways to build your skills now so that you will be ready for employment when hiring begins again.   

Helpful publications for making it through tough times:

Take Control of Your Finances When Your Income Drops

https://extension.msstate.edu/sites/default/files/publications/information-sheets/is1867.pdf

Money Traps that Keep Us Broke

http://extension.msstate.edu/publications/money-traps-can-keep-you-broke

How to Get Out of Debt

http://extension.msstate.edu/sites/default/files/publications/publications/p1737.pdf

Foreclosure and Bankruptcy

https://fyi.extension.wisc.edu/toughtimes/considering-foreclosure-bankruptcy/

Emergency Fund

Emergency funds are the foundation of having peace of mind when it comes to our finances. The goal is to get to three-to-six months of expenditures. That may seem like an impossible goal, but begin with what you can, even $10 a week will make a big difference. Emergency funds keep us from paying interest on borrowed funds, from relying on payday loans and pawn shops, and from borrowing from friends and family.

Emergency funds should be kept in a separate savings account and separate from checking accounts which are best used for paying bills. When a real emergency happens and you must spend down from the account, set up a regular payment over a reasonable period of time to pay back your emergency fund.

America Saves helps Americans set savings goals and follow through to reach them. Take the America Saves pledge here: https://americasaves.org/for-savers/pledge and learn more about meeting savings goals here: https://americasaves.org/for-savers

State of Mississippi Government Support

MS.gov is a digital way to look for a variety of information and services, including a help portal: https://www.ms.gov/.

Unemployment Benefits

To file for unemployment in Mississippi, go here: https://mdes.ms.gov/unemployment-claims/ https://mdes.ms.gov/unemployment-claims/covid19/

Government Food and Income Assistance

The government provides a variety of assistance programs, including Medicaid (health coverage), SNAP (food support), TANF (income support), and LIHEAP (energy cost assistance). You can apply here: https://www.access.ms.gov/Application.

Community Support

Many communities have local non-profit organizations that support individuals in times of need.

Look for advertisements in local papers and social media platforms on services or events from local faith communities and civic organizations.

Mississippi Food Network connects Mississippians to local food banks: https://www.msfoodnet.org/

Civic Action Agencies have a variety of support services. A directory can be found at the bottom of this clearinghouse website: https://www.needhelppayingbills.com/html/mississippi_assistance_program.html

Community Counseling provides comprehensive behavioral health services: http://www.ccsms.org/.

The National Council on Aging can help older Mississippians learn about what public and private benefits programs that exist to save money. Start the search here: https://www.benefitscheckup.org/

Health Insurance

Being furloughed means you will likely be able to continue paying for health insurance—check with your employer to see how to make contributions while going without a paycheck.

Being laid off normally means health benefits end. You have two main options for health insurance if you have been laid off. You can pay to continue your employer’s plan through COBRA for three years. https://www.healthcare.gov/unemployed/cobra-coverage/

A cheaper option is likely to be through Heathcare.gov known as Obamacare. The registration process will tell you if you qualify for Medicaid or Children’s Health Insurance Plan (CHIP). https://www.healthcare.gov/

Investing Opportunities

The volatility and downward swing of stock markets can create a lot of anxiety as investors watch the value of their investments fall. Stock markets are inherently volatile, and people lose when they try and “time the market.” Downturns are normal parts of a working market economy. Throughout history, we have experienced downturns due to wars, high oil prices, financial crises, and outbreaks of contagious diseases. When we see these sharp downturns, our first inclination is often to sell before prices fall any further. However, selling when the market is at a low point is not advisable, as it locks in potential losses. Lower stock prices make them a better value. Low stock prices mean that we can buy stocks “on sale.” Warren Buffet popularized this idea: “Be fearful when others are greedy, and be greedy when others are fearful.”

When investing, keep a long-run perspective and diversify by buying mutual funds which are groups of stocks so that we “do not put all of our eggs into one basket.” The overall trend of the stock market is upward with stocks of small and large companies returning over ten percent. This compares to rates of return of government bonds around five percent and Treasury bills near three percent with inflation about two and half percent. Having a plan to ahead of time that incorporates market volatility protects us from losing significant value of our assets, including retirement savings. Disclaimer: do not invest money you cannot afford to lose. Do not invest at the risk of meeting your current financial obligations.

The older we get, we want to keep less of our investment portfolio in stocks so that when a downturn happens, we don’t lose the majority of the value of our assets right when we need to use the money. As such, you will want to “rebalance” your portfolio to reduce the amount held in stocks and increase the amount held in bonds. Young people can hold more of their investments in stocks because they have a more time for the market to recover from a downturn. When investing on a consistent basis, these investors can take advantage of lower prices for stocks to create potentially greater return in the future. It is also strongly recommended that everyone “diversifies” their investments through buying a variety of stocks and bonds so that we “don’t put all of our eggs in one basket.”

There are many places to learn more about investing. Here are a few:  https://www.finra.org/investors#/

https://www.saveandinvest.org/

https://www.smartaboutmoney.org/Courses/My-Retirement-Plan

https://www.uaex.edu/life-skills-wellness/personal-finance/resources-for-financial-educators.aspx (webinar)

Financial Advisors

When looking for someone to help you manage your finances, look for someone who is a “fiduciary.” A fiduciary is someone who must put the interest of the client first. While this might seem like a no-brainer, remember that people go into business to make a profit, and some are willing to do this at the expense of a client’s best interest. Having a plan for emergency funds, life insurance, disability insurance, and estate planning before a crisis occurs makes living through one much smoother.

Financial Educators

Financial educators are not trained to give financial advice, but they can help you create a budget, brainstorm local resources, and make referrals. If you would like to get in touch with an MSU Extension educator, contact your local office http://extension.msstate.edu/county-offices or Dr. Becky Smith.

Financial Counselors / Financial Coaches

Financial counselors and coaches help people manage debt, improve their credit, and help clarify future goals and steps to achieve those goals. Avoid people and businesses that charge for “credit repair.” Instead, find credible financial counselors here:

Financial Advisors

Financial advisors help people manage assets and prepare for retirement. Look for Certified Financial Planners (CFP®), who are “fee only” rather than charge on commission; avoid financial advisors who make money by selling you products they have a vested interest in. Search Fee Only financial advisors who are members of the National Association of Personal Financial Advisors (NAPFA) here: https://www.napfa.org/find-an-advisor

General Financial Education

Tried-and-true self-paced short resources on a comprehensive list of financial topics:

In order to identify and inventory important papers, use this resource from Extension’s Financial Security for All: https://personal-finance.extension.org/organize-important-papers/

Consumer Finance Protection Bureau’s Consumer Tools to help with decisions involving money:

https://www.consumerfinance.gov/consumer-tools/ and 43 tools and fillable handouts: https://www.consumerfinance.gov/consumer-tools/educator-tools/your-money-your-goals/toolkit/.

Webinars on a variety of topics important to both military and non-military: https://militaryfamilieslearningnetwork.org/personal-finance/webinars/

Evidence-based blog: http://moneytalk1.blogspot.com/

Money Talks is a radio program airing each Tuesday at 9:00am on Mississippi Public Broadcasting focusing on personal finance as it applies to Mississippians. Hosted by Nancy Lottridge-Anderson Ryder Taff of New Perspectives: http://www.mpbonline.org/moneytalks/

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