We learned a lot from the 2008-2009 Great Recession. As a CPA and real estate investor, I learned that sometimes there was absolutely nothing you can do to save a bad deal. I learned that people often hang on to an old way of life much too long, putting their future in jeopardy. I learned that some people never recover, emotionally, from a financial loss while others bounce back, stronger than ever.
It might be too early to make your walk-away plan, but it’s never too soon to look at your options. Where are you right now?
Your goal right now is to look at how you can have more money coming in and less money going out. There are some government programs and lender programs to help. Remember, though, that these are only temporary fixes. But as a taxpayer, you may be eligible to get this money and it may help you survive the pandemic financially.
(Editor’s Note: I’m well aware that many people have no interest whatsoever in taking help from the government. This being said, you may be eligible for certain programs that have recently been introduced. This money may help you survive if you’ve lost your job or lost income due to the pandemic. Nobody is twisting your arm and forcing you to take this money but if you are struggling to survive financially, here’s what you need to know about these temporary fixes. ~ Daisy)
As we move into a new economy, you’re most likely going to need new strategies. For now, let’s get you through the next couple of months. Then, look at what’s next for you and your family.
Let’s start with the money that comes into your household. Cash flow in.
The Government Economic Stimulus Payment
The economic stimulus payments have begun to be distributed, but it’s an uneven roll-out.
If the IRS doesn’t have your direct deposit information, they’re going to mail a check to the address you used on the last tax return you filed. But it could take a while. They’ve estimated it will take 5 weeks to get all of the checks mailed that they know about.
If you want your payment faster, go to the irs.gov portal. If you haven’t filed 2018 or 2019 because the amount of taxable income you had was under the income threshold ($12,200) click on the “non-filer” button. If you have filed 2018 or 2019 and the IRS doesn’t have your direct deposit information, click on “Get My Money.” This is also the portal you’ll use to find out the status of your payment.
If they can’t find your record, it could be because they think you weren’t due a payment, because you have SSI (social security disability), VA benefits, or because of some glitch in their system. Just keep checking back at irs.gov.
The stimulus payments are not a lot and, at this point, it’s just a one-time thing. But it is something.
Pandemic Unemployment Insurance (PUI)
A more interesting program is the Pandemic Unemployment Insurance (PUI) addition to regular unemployment. Under PUI there are some important changes:
- The waiting period for unemployment is gone,
- The federal government will give you an additional $600 per week on top of what the state gives you.
- The additional $600/week will last from 3/29/2020 -7/25/2020,
- Self-employed persons and people who didn’t work the minimum amount that is normally required for unemployment will qualify,
- General unemployment insurance payments will last for 39 weeks.
The states are responsible for making this happen and most of them have not done so yet. It doesn’t mean you won’t get the money. It just means you have to wait a little longer.
Reduce the cash going out
Now, let’s look at what you can do to reduce the cash going out of your house.
The most common forms of debt payments in the American household are home mortgage, car payments, and credit card payments. There are some options to reduce or delay some of your current payments.
It doesn’t mean less debt. In fact, it usually means more debt because of additional interest costs, But at least you don’t have to pay right now.
The term for not paying your mortgage is forbearance. That means your mortgage payments are not currently due. Currently, government-backed loans are mandatory 3-12 months forbearance periods.
If you have a Fannie Mae or Freddie Mac backed loan, the lender is required to give you several options for paying back the missed payments. This is important! The last thing you want is to skip 3 months of payments through forbearance, and then find out the lender is going to collect all 4 payments in the next month or start foreclosure right away.
These options they are now told they have to offer are:
- A loan extension so that the missed payments are added to the end of the mortgage
- A loan modification so that the monthly mortgage payments are reduced
- A repayment plan so that the forborne amount is spread out over several months’ time
- A full lump sum repayment
For more information on these new rules, go to this article.
If you’re not sure what type of loan you have, you can contact Fannie or Freddie directly to see if your loan qualifies.
- Fannie Mae. 1-800-2FANNIE (8am to 8pm EST) KnowYourOptions.com/loanlookup › …
- Freddie Mac. 1-800-FREDDIE (8am to 8pm EST) FreddieMac.com/mymortgage ›
Please note these rules only apply to government-backed mortgages. Private mortgages don’t have these required options and may demand payment in full after the forbearance period ends.
Do you have a car payment that you can’t make? A number of car loan companies and leasing companies have programs in place to delay or extend the term of your contract.
Check in at cars.usnews.com/cars-trucks/coronavirus-payment-relief to see if your lender is offering such a deal. Communication is always best in cases like this. Here’s an article about talking to creditors.
Many credit card companies are coming forward with forbearance programs as well. They may allow you to put off making a payment, make a smaller payment, reduce your interest rate or eliminate late fees. Some credit card issuers have also agreed to not report the late payments to credit bureaus. That means your credit score wouldn’t be impacted, at least not by this.
You can find out more information on these programs at www.foxbusiness.com/money/credit-card-forbearance-programs-bills
What happens next?
Now that you’ve got the next few months at least settled down, the question is, now what?
First – don’t depend on the government, but be prepared to get the money they’re offering. The new coronavirus economic stimulus and tax acts have created a whole new group of grants, loans, and tax breaks. We call these CoronaTax.
Congress has given us four CoronaTax bills. The first one dealt mainly with funding for important health agencies. The gold is in the next two bills.
From the book, CoronaTax: Free Money! New Opportunities!, the purpose of these next two bills is:
- Keeping you employed (if you currently have a job),
- Keeping your employees working (assuming you have a business)
- If you can’t work now (or your business can’t), getting you some income fast,
- Providing sick & paid leave for your employees, with the government’s help, and
- Giving businesses special tax breaks. (source)
Get your family stable financially. Then learn about what’s possible for the next step. Form a strategy and implement perspective.
We’ve got a new economy coming. Be prepared with knowledge, strategies, and action.
Diane Kennedy, CPA is the New York Times bestselling author of tax and business books. Her website, USTaxAid.com, is dedicated to deciphering complicated tax law laws and turning them into actionable tax strategies anyone can use to make and keep more money. Visit her Facebook group for all the updates and check out her new book, CoronaTax: Free Money! New Opportunities!