How to prepare if your income is reduced due to the coronavirus


(CNN) – With government officials advise people To avoid large gatherings to reduce the spread of coronavirus, a growing number of companies and organizations are cancellation of events or reduce services.

While this may help curb the spread of the disease, it is bad news for freelancers, independent contractors, and gig workers who lose income because of it. People who see their jobs interrupted or canceled – like drivers, delivery people, planners, salespeople and designers – expect their incomes to suffer as the job dries up.

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How do you prepare for a sudden drop in income?

Use other sources of income

In one week, Jude Maines, an Atlanta-based onsite meeting coordinator, lost six jobs and more than $ 33,000 in salary and is worried that more cancellations may be on the way.

One big event he booked again, a five-week job in Tokyo during the Olympics this summer, would account for around 20% of his earnings for the year.

“I’m afraid they will cancel,” he said. “Those of us who work in this space, we’re nervous about how we’re going to pay our bills.”

Yet, says Maines, he is one of the lucky ones. He is married, his wife works, and he also owns a property that he can rent out for extra income if he needs it. Some of his colleagues, he says, are considering working for ridesharing companies, finding coffee shop jobs, or leaving the industry for more stable employment.

If you expect your income to be reduced, your goal should be to increase your cash flow and reduce your expenses, said Brian Berkenhoff, chartered financial analyst at Birch Investment Management in South Dakota.

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“This would be a great time to consider refinancing your mortgage if you own a home,” Berkenhoff said. “With interest rates at historical troughs, you can choose two routes, either withdraw money from your home for an emergency fund, or seek to minimize your monthly payments. “

If your income has already gone down, you may need to supplement your income with other types of work, but take some time to work on your business, said Ben Henry-Moreland, a certified financial planner at Freelance Financial Planning at Omaha.

“Now is the time to track down unpaid invoices, build relationships with future business contacts, improve processes,” said Henry-Moreland. “Business cycles go up and down and successful small businesses are prepared for those cycles. Maintaining a business owner mindset helps freelancers plan for times of highs and lows and how to stay useful during both.”

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As the situation evolves, you may find that you have a way to offer your services in a coronavirus-aware manner, said Tara Unverzagt, certified financial planner at South Bay Financial Partners in Torrance, California. You can be the one who can help employees work remotely, or you can be the wedding planner who can help couples plan their big day safely.

Track your bills by adjusting them

Even if your income goes down, the bills don’t stop.

If there’s ever been a time to cut back on lattes and suspend subscriptions, it’s now.

Meeting your payment obligations should be your top priority. And don’t forget the money you are saving for taxes.

“Freelancers should pay estimated taxes as they go, based on the income they earn,” Unverzagt said. “Look at how much you pay in estimated taxes and reduce it to reflect the drop in income. “

But even in tough times, it’s never good to skip estimated tax payments, Henry-Moreland said. “Tax debt can be a slippery slope, it can be difficult to recover from it.”

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Also, he said, if you have an Affordable Care Act swap health insurance plan and get the premium tax credit, you can report a change in circumstances. to increase credit and effectively reduce your health care costs.

For those who have student loans, reaching an agreement with your provider can make payments easier.

“Contact your loan manager,” Berkenhoff said. “You may be able to defer your loan repayments or have an income-based repayment plan.”

This is what the emergency fund is for

Self-employed people like freelancers, contractors, and gig workers should always save for rainy days. But in practice, it can be much more difficult for this group than for those with stable wages.

For those without emergency cash, the best thing to do would be to subsidize expenses using an inexpensive line of credit, according to William Hatton, certified financial planner at Billfold Budget Counseling in Los Angeles.

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“It could come from home equity, the bank, or even taking advantage of a low or no APR on a new credit card,” Hatton said. “With the [Federal Reserve] lower interest rates, it’s an even better option if you need emergency funds to make ends meet. “

Now is the time to get lines of credit, whether it’s applying for a new credit card or getting a limit increase, or a traditional line of credit.

And make no mistake: it’s urgent.

In the life cycle of a self-employed person there are natural fluctuations in your income, think of that as a bigger slowdown, Henry-Moreland said. You don’t want to withdraw all of your money before moving on to your emergency fund or credit. Instead, take a little of the fund to cover what you are missing.

“Don’t be afraid to tap into your emergency fund which is set up for such emergencies,” Unverzagt said. “But you’ll have to cut back on non-essential spending to make sure the emergency funds last until things turn around, which could take a long time.”

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