6 Ways to Cope with Income Loss Due to Coronavirus
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The coronavirus pandemic has already destabilized global markets and led to countrywide lockdowns around the world. This ongoing crisis has threatened job security for many Americans who are unable to work from home. Millions are left wondering how they will cope with income loss that has been brought about by COVID-19.
Though this pandemic is far from over, there are several ways to handle a sudden loss of income. Whether you’re a self-employed freelancer who has lost clients, a retail employee whose hours have been significantly cut, or someone who’s been forced to stay home until the crisis is over, don’t worry — you have options. Let’s take a look at six ways you can cope with income loss due to the coronavirus …
1. Reduce Non-Essential Spending
When you’re trying to figure out your next steps in a financial emergency, it is important to first take account of what you need and what you can live without. Many Americans will find that they’re paying for numerous services they don’t even use — like those magazines you keep telling yourself you’ll get around to reading, but ultimately end up piled on your coffee table.
However, to really confront your unnecessary expenses, you’re going to have to say goodbye to some you’ve grown used to. The negative effects of income loss will only accelerate if you continue to pay for streaming services, new clothes, takeout, or similar extraneous expenses. After all, something that affects finances like the coronavirus doesn’t happen often, so when it does, you have to be ready to tighten your belt. This means limiting your purchases to the essentials, like food, shelter, healthcare, Internet access, and transportation.
2. Cut Costs on Recurring Bills
A loss of income isn’t going to change the fact that you still have bills to pay. While it might be premature to downsize your living space or drain your savings account, it’s never too early to look for ways to save a couple of bucks. Oftentimes, people purchase goods or services from a certain company based on convenience or positive reviews. While these are both legitimate factors, they don’t necessarily offer you the best value for your money. With recurring bills like insurance, cellular data, or Internet service, and certain subscription services, you could be paying more than you should.
For example, approximately 95% of American households own cars. If you own a car, the costs of insurance and maintenance likely make up a significant portion of your monthly expenses. If your income has decreased as a result of the coronavirus, you might consider shopping for a lower price without lowering your coverage to help you save in the short and long term.
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3. Revise Your Shopping Budget
Americans spend nearly 10% of their income on groceries and dining out. Though food is obviously an essential part of your budget, there are ways to cut back when times are tough. First and foremost, you should limit ordering restaurant food as much as possible. It is far less expensive — and often healthier — to cook your own food than it is to pay someone else to do it (and bring it to you).
Next, you should evaluate which food items are essential for a nutritious diet and which items are luxuries. For example, you should put fruits and vegetables at the top of your list, while you can probably exclude expensive desserts altogether.
4. Consider Supplemental Freelance Jobs
Cutting costs and budgeting help slow spending flow, but they don’t do much to help put more money in your pocket. Some experts are predicting that the coronavirus crisis could continue well into 2021. Few Americans can afford to go without a steady income for long, which means that many will soon need to seek out new opportunities.
Freelance sites like Upwork, Freelancer, and Fiverr offer people the opportunity to use their skills to develop a secondary source of income. If you have a skill that can be utilized via the Internet (writing, coding, translating, teaching, etc.), then you can find clients willing to pay you for your services. This way, you can work from home until your regular income has stabilized. Who knows, you might even fall in love with freelancing and make it your full-time job!
5. Avoid Taking on New Risks
The coronavirus caused a panic that resulted in a weakened and volatile stock market. However, this also meant that previously expensive stocks were at their lowest prices in years. We saw a similar situation play out in the real estate market.
It may be tempting to buy when prices are low, but if you’re concerned about income loss due to the coronavirus, now might not be the time to take on new risks. Experimenting with new investments or taking on new debt (like a mortgage) will likely only make it harder to get through this crisis unscathed.
6. Consolidate Your Debt
Finally, with fluctuating or lost income, many people will need to lean on credit cards or loans to pay their bills. Unfortunately, this means higher debt payments in the future, which could cause many people to feel overwhelmed as their debt and interest accumulate.
Fortunately, consolidating your debt can help you take control of the situation. By consolidating your debt into one low-interest loan, you could potentially save yourself thousands in the long term. Additionally, it will simplify your finances by allowing you to make fewer payments each month.