What to do while waiting for Biden’s relief package

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As coronavirus cases increase nationwide, Congress seems a long way from passing another stimulus bill before the holiday season begins. Millions of struggling Americans are now looking to President-elect Joe Biden in hopes he’ll rally lawmakers around economic stimulus efforts – and quickly.

On Monday, in his first speech on the economy as president-elect, Biden called on Congress to put differences aside and act quickly to “bring immediate relief” and help struggling workers get back on their feet.

“Now,” Biden urged, “not tomorrow,” stating that he would support the $ 2.2 trillion updated HERO Act, which includes subsidized unemployment benefits, a second dunning check, state and local government aid and housing assistance.

Some speculate that if Congress comes to an agreement in the final months of the Trump administration, the result could be a compromise between the HEROES Act and the Republicans’ $ 500 billion “lean” bill (which did not include stimulus checks or improved unemployment benefits).

As speculative as it is, any additional stimulus of any kind by January would be a huge relief for millions of Americans, especially as the holidays approach. But since nothing is guaranteed, we spoke to a few financial planners to get their best advice on what you can do right now to get you through this time.

They recommend doing these three things to shore up your finances while we wait.

1. Plan as if a stimulus is not going to occur

While many Americans are optimistic that a Biden presidency indicates economic relief is on the way, the reality is that legislation takes time and nothing is guaranteed.

“Getting your own ‘ducks in a row’ will further strengthen your financial stability, and any stimulus will be the icing on the cake,” says the certified Nashville-based financial planner. Jeanne Fisher.

The first step in preparing for the unexpected is to cut unnecessary expenses. Review your credit card statement to find areas where you could spend on things that you no longer use now that your lifestyle has changed (gym memberships, clothing / makeup subscription boxes, etc.). Also, look for areas where life in quarantine has saved you money, such as reduced travel and dining expenses. Write these areas down and start thinking about putting that money into a savings account instead.

Consider opening a high yield savings account, as the Varo savings account, so that you can also earn a little more interest than you would in a physical account, while avoiding paying fees.

Learn more: Don’t know where to put your money? The pros and cons of keeping your money in a high yield savings account

2. Find ways to earn extra money

“Let’s face it, most of us can only cut our budgets so far,” says Fisher. Once you’ve cut back on spending, you may need to find ways to make some extra cash in order to make ends meet.

Here are a few ways to leverage or free up extra money in your budget:

  • Contact your service providers and creditors and ask to reduce your monthly payments or temporarily suspend your bills. If you’ve contacted them before, try contacting us again after a few months to see if their policies have changed.
  • Cash in your credit card points. You may have stored them for future vacations, but if spending is tight, it might be better to cash them for a credit on your statement to offset some of your daily expenses.
  • Find a part-time job, a temporary job or a side activity what you can do to bring in the extra money. Do you have strong opinions? Respond to online surveys on Addicted to polls, Swagbucks or Vindale Research. Do you like to work with your hands? Make a Thumbtack account and do odd jobs to help people repair and renovate their homes. Use your skills to earn extra money.
  • Sell ​​stuff on the Facebook Marketplace. Now is a great time to revamp your home office and dump out old waste for the holidays. If you are not on Facebook, try selling online at Let’s go, Craigslist and Amazon.

3. Take an inventory of your lines of credit and assets

The above options may hold you back temporarily, but if you need a substantial amount of money to get you through the next few months, you may need to take a look at your lines of credit and other assets.

“At this point, the next step is really to look at those tougher decisions,” says the DC-based certified financial planner, Alicia R. Hudnett Reiss.

These options may include:

Seeking help from a family member

If you think you need to borrow money to survive for the next few months, consider seeking help from a family member if possible. The average APR for personal loans is 9.34% according to the The most recent data from the Fed, and the average credit card interest rate is around 16.43%. Borrowing from a family member with a plan to pay them off could help you avoid taking on a high interest date that could take years to pay off.

Access to credit

While it’s not always best to borrow, especially at high interest rates, using a credit card or line of credit may be necessary to help pay for your daily expenses. If you already have a credit card or other revolving account, this is the most convenient option with minimal paperwork or applications. If you have to borrow, make sure you have a plan to pay it off when you get back to work.

Retirement accounts

If you have a retirement account, such as a 401 (k) or an IRA, you may want to consider withdrawing money or taking out a loan against your current contributions.

“With a Roth IRA, your initial contributions are always tax-free (because it’s after-tax money that you contributed) and penalty-free,” says Hudnett Reiss.

Until December, you can also withdraw up to $ 100,000 penalty-free from traditional retirement accounts like your 401 (k) through the Coronavirus-related distributions under the CARES Act. All withdrawals will be taxed, but the early withdrawal fee will be waived for those under 59 and a half. You can choose to either repay what you have withdrawn from the account or pay taxes on your withdrawals over a three-year period.

“We do not know if this [benefit] will be extended, ”said Hudnett Reiss. This option is currently open until December 31, 2020.

Your retirement accounts are protected if you ever file for bankruptcy, so think twice before you empty them, especially if you’ve been saving for years.

Life insurance policies

“If times get really tough… your permanent life insurance policies can get you loans,” says Fisher.

However, there are often caveats: you can usually only take out life insurance loans on whole or permanent policies after you have made enough monthly payments to build up cash value on the policy. This may mean that you will need to contribute to the policy for a number of years before you can access them. You also can’t borrow on term life insurance policies, which have lower premiums and don’t accumulate cash value.

Life insurance loans shouldn’t necessarily be your go-to option, as you’ll be likely to pay fees and interest (like any loan), and your withdrawal could affect the benefits you or your family will receive. if the loan is not repaid. However, it’s worth knowing the ins and outs of your policy plan just in case.

Personal loans

Personal loans could be a useful option, as they are simpler than borrowing against a pension plan or life insurance policy. Just be aware that you will need to make monthly payments on your loan, usually within 30 days. And depending on the length of the loan, you could make payments for a few years.

You will need proof of income to apply for a Personal loan. Some lenders may allow you to borrow money only for specific uses, such as debt consolidation or refinancing.

You could also be affected by origination or registration fees to take out a personal loan. However, you could save interest compared to billing your expenses to a credit card.

Don’t miss: 10 questions to ask yourself before taking out a personal loan

At the end of the line

As Biden seeks far-reaching stimulus packages to help Americans who have been affected by the coronavirus pandemic, it likely won’t happen until 2021. In the meantime, know your options so you can make the best moves. money at your disposal.

This story has been updated to correct the mention of the five-year rule for withdrawing IRA contributions. There is no minimum waiting period for withdrawing your after-tax IRA contributions, only earnings. Previously, it indicated that there was a five-year rule for withdrawing contributions.

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of Select’s editorial staff and have not been reviewed, endorsed or otherwise approved by any third party.

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