The coronavirus pandemic has changed the way most Americans live their daily lives across the board, from an increased emphasis on handwashing to working completely remotely to exercising strictly at home.
People across the country are being asked to stay home to slow the spread of the coronavirus because less contact with others reduces the chances of getting or spreading the virus. While this global crisis centers around physical health, Americans also must keep tabs on other important aspects as well, as their mental health and, let’s face it, the health of their wallet.
Daily life has changed to protect the physical health and when it comes to financial health, financial guru Suze Orman, author of The Ultimate Retirement Guide for 50+: Winning Strategies to Make Your Money Last a Lifetime and host of the Women + Money podcast, says that people should be making changes to how they handle their money, too.
Don’t pay off your credit cards in full
Don’t pay off your credit cards. What? Orman knows that for 35 years she has told people to get rid of their credit card debt and pay their bills on time, but this global pandemic is unprecedented, calling for unprecedented financial advice.
“The biggest piece of advice that I’ve been giving to people is do not pay off your credit cards in full. You get a stimulus check, you get your unemployment check..pay the minimum payment due on your credit cards,” Orman told Ladders.
Orman recommends saving as many pennies from these relief funds as possible because in 2008, when the Great Recession began, credit card companies began decreasing many people’s credit limit from $5,000 down to $1,000, and even offered to pay people to close down their cards altogether. Credit card companies did this because they didn’t want people spending money that they would not be able to pay back.
“So many people would say, ‘Suze, why shouldn’t I, like you’ve always told me to do, pay off my credit cards, and then if I need something just use my credit cards again?” Orman said.
Orman’s response is that we really have no idea how long the coronavirus crisis will last, and therefore how long the economic effects from it will continue, meaning credit card companies are likely to decrease limits once again. If you use all your cash to pay off your cards, and when your limit is reduced, you have essentially backed yourself into a financial corner.
“So for the first time in my life, I’m asking people to not use your cash. Keep your cash as if it’s gold right now and put all the expenses you can on your credit cards and pay the minimum payment due,” Orman said. “At the same time I would be calling the credit cards and asking them if they can give you a 0% interest rate or lower your interest rate. Just try it.”
For those that are still employed, Orman urges you to make sure that you have credit cards that offer you a 0% interest rate for the longest period of time in case you get sick or lose your job.
Don’t make extra payments on your mortgage
The other huge piece of advice that has changed for Orman is related to that “hold onto your cash” mentality.
Orman always encourages listeners to make sure they own their home outright by the time they retire, which for many people means sending extra payments in every single month for that to happen. During this time, Orman now encourages home owners not to do that.
“I’m asking you all to save as much cash as you possibly can,” she said.
What to do if you are unemployed because of the coronavirus pandemic
If you are one of the more than 22 million Americans that have filed for unemployment benefits since mid-March, hopefully you have started to receive your checks. If so, Orman again urges people to hold onto as much of this money as they can.
Orman suggests contacting your landlord, your mortgage company, your credit card companies, your insurance companies, your utility companies, your student loan companies– basically any person or company that you are currently making payments to right now. The reason for your call is to ask to postpone payments for as long as possible.
If you decide to do this, make sure that it will not hurt your FICO credit score. Ask whoever you are talking to if they are going to be reporting this to a credit bureau or not, and try to convince them not to.
“Try as much as you can to hold on to as much of these checks as you possibly can until everything is lifted and you can have a regular paycheck coming in again,” Orman said.
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