The United States of America has become the epicenter of the COVID-19 pandemic with 7.22 million reported cases and 206k deaths. During the lockdown, which lasted for several months, millions of Americans lost their job and many of them filed for unemployment. Americans were already struggling with managing their money due to economic problems that plague the country. The pandemic only made it worse. The preexisting debt crisis, which Americans have been dealing for years, worsened after the population-to-unemployment ratio peaked. Many Americans lost their only source of income, which means that most of them have been unable to pay off their heavy loans and credit card bills.
Businessman and financial realist, Ronnie F. Lee, writes about debt management in his latest book about good and basic money management, Know Money No Problem (ISBN 978-1952263583). Debt management is an integral part of money management. You don’t usually reach financial freedom until you have paid off all your debts. Many financial gurus suggest to never take on debt after paying it off once. During a crisis, money management can seem almost impossible, but that isn’t the case. Verve shares a few ways to deal with your debt during the pandemic:
· To manage your debt, you need to know what you owe.
First, create a list of creditors, your balance with each, your interest rate, and your payment schedule. This will not only give you your whole debt picture in one place, but it will also help you make decisions about how to attack and eliminate your debt over time. This is also a good opportunity to outline your monthly bills to see if there are any areas you could cut or reduce your expenses (like maybe going from three TV subscription services to one).
· Act quickly.
As soon as you know your income will be affected, contact creditors to explain the coronavirus’s impact on your ability to pay. Ask about options for financial relief. The better you understand your options, the more choices you will have and the more tools at your disposal to help you manage your debt. For example, some automotive lenders and others have extended 90-day payment deferments for customers affected by the coronavirus crisis. Now is also a good time to explore lower interest rates for balance transfers or other payment options that can help you create a plan and tackle your debt over time.
· Make payments on time
Cash and coronavirus seem to be the only things on our mind lately. But on-time payment history is one of the biggest contributing factors to your credit score. Payments reported 30 days late or more hurt your score—so if you’re already late, but within that 30 days, pay up now before it can be reported. Even if you can only pay the minimum, don’t stop making your payments on time. If you need another reason to pay on time, consider the impact of late fees on your overall budget and ability to manage your debt. Automating minimum payments can eliminate the risk of paying late and owing extra penalties or fees.
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