What to do when a financial crisis hits
Because of the pandemic, many Americans are facing serious financial problems. If you are one of them, I recommend an excellent new book by Washington Post personal finance columnist Michelle Singletary.
It is easy for individuals facing financial problems to make poor decisions. For such people, “What to Do with Your Money When Crisis Hits: A Survival Guide” (Houghton Mifflin Harcourt) is a road map to recovery. Thorough and easy to understand, it covers a wide range of topics and provides practical advice.
When people face mounting bills because of layoffs, accidents and other emergencies, it can be difficult to know which expenses to prioritize, to distinguish between those that must be paid immediately and those that can be postponed or partially paid.
Singletary reviews options regarding housing, explaining how to work with landlords and mortgage lenders and servicers, and she explains the importance of understanding the foreclosure process, which varies across states. She also discusses options regarding dealing with credit card companies to postpone payments that are not high priority.
A top priority, she argues, is feeding your family. She does a good job explaining the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps.
Although there are income requirements, even if you have lost your job, you still might qualify. There are special SNAP rules for households with elderly and disabled members. Each state has its own application process.
Singletary gives a solid review of the pros and cons of withdrawing funds from retirement accounts such as IRAs, as well as of 401(k) loans. She also discusses payday and title loans. They are both terrible options, and I am glad to see the author avow that these options are only a last resort.
The book contains valuable information about unemployment benefits, parttime work while receiving benefits and the appeal process.
There is detailed information about health care options, including COBRA, the Affordable Care Act, Medicaid, shortterm insurance coverage, flexible savings accounts and health savings accounts.
There is very good information regarding the best ways to handle your outstanding credit card debt. Also included are the pros and cons of filing for the two types of bankruptcy.
An important section discusses your rights regarding debt collectors. Debt collectors have to provide proof that you owe any debt; many are unable to do so. The book provides valuable sources so that you understand your rights and options.
Those who find themselves in financial crisis and who have reached age 62 can consider applying early for Social Security benefits, which has some advantages and several disadvantages. One advantage is that you can file for a benefit early and still work part-time without penalty.
Some whose jobs are in jeopardy consider starting their own businesses. Singletary suggests some options that have minimal risks.
The book contains solid advice regarding investing and savings options. For example, should you be taking all your money out of the stock market? If you can still invest in the market, what options should you consider? The advice to invest in low-cost index funds is sound. Singletary explains how priorities should vary according to the period of life you are in.
If you’re facing significant personal financial problems, and must make critical decisions now and in the near future, this book will be very valuable to you. Even if you are not, you never know what the future will bring, and this book will help prepare you for whatever fate has in store for you.