What Will You Do With The Coronavirus Pandemic Funding: Things to do and not do.
If you meet the criteria and qualify for the coronvirus pandemic funding, you are about to get $1,200 from the Federal Government.
Question: What are you going to do with the money?
If you’re in one of the deferred payment plans for your residence, your auto or your credit cards, how are you going to handle it? What are you going to do with it?
Consider this: If you are living a normal life: Paying your bills on time, saving money for retirement and do not really need it. This presents a golden opportunity to invest it. You may want to consider a few things.
1. You can put the check in a saving or money market account until you decide how you want to invest it.
2. You can put it in a Certificate of Deposit (CD) for 90 days (until the pandemic is declared over). While you wait, roll it over every three months until you talk with an investment professional about putting it in the financial markets where you can earn compound interest.
3. If you are comfortable with investing in the stock market, now would be a good time. The market is down 30% from what it was 14 days ago. Stocks are relatively cheap. There are some bargains out there if you take your time and research good buys.
Whatever you do, do not spend your money on frivolous “want” items. This appears to be a one time, tax free deal. It would be wise not to throw it away. Make the best of it.
If you meet the criteria for coronvirus pandemic deferred payment plans for your residence, your auto or your credit cards, how are you going to handle it?
- You could ignore it and continue life as usual.
- You can opt not pay your bills for the period your creditor will define and save that money for investing.
If you decide to go the deferred payment route, consider a few things first.
- Find out how the deferred payment plan works. It will be different for each individual debt.
- Home mortgages and rent will be treated differently than your car loan or credit cards.
- Find out if the plan is interest free or comes with an interest accrual plan; meaning the interest will be added on to the ending balance at payoff (Hint: surprise, surprise). For example California Banks have signed on to a 90 day extension for mortgage loans. The banks are Wells Fargo, Citi, Chase and J.P. Morgan. Bank of America’s deferment is 30 days.
Imagine if you could save three months of your mortgage payment or rent. Check to see what the deal is on the 90 day non-payment plan.
The Sacramento Municipal Utilities District (SMUD) put out the following statement: Earlier this month, we restored power to customers whose service was disconnected due to non-payment and we will not disconnect customers for non-payment through April 17, which we extended from March 31.
Note: I don’t think this is a forgiveness policy. And I am not sure how they will add back payments to your bill (next billing cycle) after the April 17th grace period ends. Check to be sure.
All of these deferrals mean you may be able to do a couple of things:
- Pay your bills like you regularly do and forget this whole deferment thing (recommended).
- Take advantage of the opportunity to save some cash to build an emergency fund.
- Use the saved money to start an investment portfolio that will appreciate or generate compound interest.
Remember: Nothing is free. You get what you pay for.
It’s all about cash flows and the fundamentals of money management.
With me, I pay my bills on time and sometimes double down (mid-payment cycle) to buy down any credit I have.
If you want to learn more, go to the various websites of any company you owe money too.
Do your homework. Do not depend on what “someone told you.”
You can also attend the Greater Sacramento Financial Literacy Group (Facebook) to learn more about managing your personal finance and investments.
If you have any questions, send any of us an email.
Stay healthy and best wishes on your money management future.
Robert L. Woods
(a.k.a. R. LaMont W)