We are facing an unprecedented event. Moment to moment, we are witnessing the shutdown of economic activity everywhere. The grocery stores are buzzing, and people are scrambling to grab each roll of toilet paper they can. Needless to say, rationality is not pervasive. What to do? Focus on the big picture. Like all adversity- this will pass, and we will survive. The key is to prioritize – on two levels – health and economics. The health side has complexities because knowledge is evolving and that may lead to altered guidelines. The solution is to keep abreast of the guidelines and adapt to changes as necessary. The information is readily available.
There are no guidelines on economic problems caused by COVID-19. If you are financially strong and have savings to weather the storm, that’s what you need to do, and the savings that you have in reserve will serve their intended function. Too many people and businesses, however, live paycheck to paycheck – with no savings. If you are among this massive group – you need a plan. The government has said it is taking steps to make sure cash continues to flow. That’s good news – but until we have the “when” and the “how” – you need to proceed with caution. You should not allow yourself to have no cash to operate with. This applies individually, as well as with your business. On the short term, postpone making payments if necessary – so you do not leave yourself without any cash reserves. Late payments less than 30 days are not reported to the credit bureaus. You can get late fees waived. After 30 days, credit does take a hit – but better to have cash in reserve than to be left without cash and then find your available credit is eliminated by the bank. If faced with only two options – both of which are unappealing – you must select the better of the two.
If you have reserves available on an equity line on your home, take those funds first, the interest rate is lower. If you end up not needing the cash, pay the debt back down. If you have no reserves and no equity line, but cash is available on cash advances against credit cards – you need to make a decision. The interest rates are appalling, and you cannot afford to pay credit card debt over the long term at 20+% interest. This, however, is a solvable problem. Trying to pay for food, fuel, and housing when you have no cash and no credit does not have a solution. You also have no assurance that the banks won’t panic in a heartbeat and trim available credit. We learned in the financial crisis that what the banks say and what they do does not always match up. If faced with this situation – I think it’s better to hoard the cash – take the advances before available credit disappears. Get through this with cash – and then you can figure out the way to eliminate the debt.
The lesson we’ve talked about many times is true – you need to be debt free and have savings. Today, however, if that is not where you are at, the lesson is – you need available cash to cover food, housing, and transportation – and relying on Uncle Sam to save you is too great a risk. Our Estate Planning Seminar that was scheduled for Wednesday, March 18th – is postponed, of course. Our debt relief seminar scheduled on April 8th – is on for now, but likely will also be postponed. If you need help, however, just call us. You can come in or we can consult over the phone. The good times are ahead — we just have to ride out the storm.
Hang in there,
Did you know that THAV GROSS offers free consultations for business, financial, and tax problems? Call us anytime – (248) 645 – 1700 or CLICK HERE to send us a message.