Four steps to rebuild your financial life after COVID

WASHINGTON » After the storm comes the cleanup — and the quandary of what to fix first.

The devastation following Hurricane Ida made me think of the monetary wreckage wrought by the coronavirus. The pandemic hasn’t flooded any homes, but it certainly has caused a lot of financial damage.

There are millions still in the midst of this economic storm. The end to the national eviction moratorium for renters will no doubt leave many people without a secure place to live. Others are still out of work or have had their hours cut as the United

States continues to battle an increase in coronavirus cases.

But many people are starting to recover. They are back to work. They have been able to negotiate to stay in their apartments or hold on to their homes. So the question you might be asking is this: What should I do now if I’m in the recovery phase of the pandemic?

Here are four steps to financial recovery after COVID:

GET CAUGHT UP. » In the first stage of your recovery, focus on catching up on overdue bills or loans. If you’re about to exit a forbearance for your home or other loans or credit card debt, make sure you are negotiating a repayment plan you can manage.

Under the Coronavirus Aid, Relief and Economic Security (Cares) Act, borrowers with federally backed mortgage loans could ask for an initial forbearance of up to 180 days. If additional relief was needed, they were entitled to a 180-day extension. Interest still accrues, but fees and penalties are waived. The Biden administration has extended the forbearance enrollment window through Sept. 30.

Borrowers with mortgages covered by the Cares Act have a number of repayment options, including taking the delinquent balance and adding it to the back end of the loan. The pastdue payments would effectively extend the term of the loan.

If you deferred other debt, work with your creditors to come up with a realistic plan to catch up. Please, don’t promise what you can’t afford. If you need help negotiating with creditors, get assistance from a nonprofit consumer counseling agency by going to the website for the National Foundation for Credit Counseling (nfcc.org). You can also call (800) 388-2227.

REPLENISH YOUR RAINY-DAY FUND » The pandemic unleashed a flood of financial strife that may have decimated your emergency fund, and that’s OK. If you’re able, start rebuilding this all-important safety net (or start one, if you never had a rainyday fund). You might be inclined to concentrate only on paying down your debts, but don’t ignore the need to have a small savings cushion. If you don’t save something and you have a financial emergency, your only option may be to borrow again, and you want to avoid this while you’re in recovery mode.

Although the recommended stash is three to six months of living expenses, don’t put too much pressure on yourself to reach that goal right away. Start with enough savings to get you to your next paycheck.

Here’s another important thing to consider. In a June CreditCards.com survey, more than 4 in 10 U.S. adults said they were willing to take on debt for discretionary purchases in the second half of 2021. I know you may be anxious to treat yourself now that things are better, but don’t splurge until you’ve stabilized your financial situation, and that means having a healthy emergency fund.

REPAIR YOUR CREDIT » Start by taking a look at your credit reports from the three major credit bureaus: Equifax, Experian and TransUnion.

You can get your credit report via AnnualCreditReport.com. Federal law entitles you to a free copy of your credit report every 12 months from each credit reporting company. But during the pandemic, the three credit bureaus are giving consumers free access to the reports on a weekly basis. The offer was supposed to have ended this year. However,

Experian, Equifax and TransUnion announced that free weekly access to credit reports will be extended until April 20, 2022.

Your bank or credit card lender may offer a free credit score. If it does, definitely take a look. If none of your financial institutions offers a free score, I like the free credit-score report from Discover at creditscorecard.com.

There are no shortcuts to strengthening your credit score. You do not need to pay any company to help you restore your credit history if it took a hit during the pandemic. Under the FICO credit scoring system, 35% of your credit-score calculation is your payment history and 30% is determined by how much debt you’re carrying. The two major ways to improve your credit are paying your bills on time and reducing your debts. Seriously, that’s it.

REBUILD YOUR RETIREMENT SAVINGS » If you stopped saving for retirement or reduced your contributions, get back into this habit once you have a better footing on your finances. If your company offers matching contributions,

put in enough to get the match. But if you’re still deeply in debt or lack emergency funds, start there first and then boost your retirement savings next.

The important thing is to take it slow and not feel rushed to get back on track if you lost your job or had a disruption in your income. Your recovery from the financial calamity the coronavirus caused might be a long process, so give yourself permission to take as much time as you need to rebuild after this storm.

Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is michelle. singletary@washpost. com. Follow her on Twitter (@SingletaryM) or Facebook (www.facebook. com/MichelleSingletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer’s name, unless a specific request to do otherwise is indicated.