Six Financial Tips for 1099 Workers Affected by COVID-19

If the COVID-19 pandemic has recently impacted your ability to work, you may find yourself facing some unsettling financial stresses… and you’re not alone. Over 6 million Americans recently filed for unemployment benefits. The good news? With careful planning and the help of available resources, you can stay in control of your finances during this uncertain time.

Tip #1: Revisit Your Budget

Has your ability to work suddenly changed? Now is an important time to review your budget and see what you can do to make ends meet. Free online tools like Mint and Nerdwallet can help you build a budget tailored to your personal situation. 

Some strategies to consider while budgeting: 

• Prioritize important bills. Credit card bills, loan and mortgage payments, and other important financial obligations affect your credit score. That’s why it’s important to arrange your finances so that you can pay these bills on time. You may be able to take advantage of leniency programs if any of these payments are challenging to make at the moment; we’ll discuss this option in the next section. 

• Cut back on non-essentials. Since most of us are stuck at home, it’s easier to spend less on “wants,” like gym memberships, subscriptions, coffee-to-go, and take-out dinners. You’d be surprised how quickly these expenses add up! The more you can cut back here, the more you can save for other essentials, like groceries and utilities.

• Continue saving. If you use the classic 50/30/20 budgeting technique, you know to save about 20 percent of your money for unexpected emergencies and times of need. When possible, continue to save and prepare for future months where you may still be on the search for employment. 

Tip #2: Look Into Leniency Programs

Many companies are offering leniency programs to help ease financial burdens during this stressful time.

Student Loans

If you are unable to afford your student loans right now, you may be in luck. There are different options available to you depending on the type of loan you have:

• If you have a federally-held student loan:As a response to COVID-19, all federal student loan payments have automatically been suspended, with 0 percent interest rates, until September 30. You’ll need to make up these payments eventually, but this deferment can help you temporarily reinvest money in other necessities. Keep in mind that this legislation does not apply to private loans or FFEL loans; if you’re not sure which type of loan you have, you can always reach out to your lender and ask!

•  If you have a private student loan:You may be able to request an income-driven repayment plan or a forbearance. These options postpone or adjust your payments based on your income, but they may still accrue interest. Many banks, like Citizens Bank and Wells Fargo, are currently offering relief options. We suggest reaching out to your loan lender and explaining your situation to see how they can help you save money during this time. 

Mortgages

As interest rates are historically low, now may be a good time to consider refinancing your mortgage. You may also be eligible for assistance programs, such as waived late fees and/or payment suspensions. Under the newly passed CARES Act, federally-backed mortgages now have some new protections. Foreclosures, which happen when your lender takes back your property if you can’t make your payments, are temporarily suspended. Also, you have a right to contact your lender and ask for a forbearance that lasts up to 180 days. A forbearance pauses or reduces your payments for a limited time; you’ll need to repay the money later on. Banks and some states are offering mortgage relief options, as well; Wells Fargo Bank, for example, is allowing people to request 3-month payment suspensions. For more information about COVID-19 mortgage relief options, the Consumer Financial Protection Bureau has an excellent guide here. We also recommend working directly with your mortgage servicer. This is the company you pay your mortgage payments to each month. If you’re not sure who to contact, look at one of your recent mortgage statements. You can ask your servicer if they have any options to help you reduce or suspend payments; be sure to also ask if they can waive late fees. 

Inside tip: If a loan servicer agrees to defer or reduce your payments, be sure to ask for written documentation that confirms your agreement details. You’ll want proof in case there are any discrepancies later on.

Tip #3: Think of Stocks as a Long-term Investment

When asked about COVID-19’s effects on the economy, Nobel-winning economist Robert Shiller said, “I’d try not to worry too much about the stock market.” 

At the end of the day, the stock market will recover and businesses will start to make money again. If you have funds to invest, stock options are currently inexpensive; you may consider purchasing options from financially-sound companies that will be able to ride out the pandemic. Otherwise, don’t panic and consider staying the course. Stocks are a long-term game, and it is often less risky to wait for your portfolio to recover than to sell when the market tanks.

Tip #4: Don’t Be Afraid to Seek out Government Assistance

Thanks to the new Coronavirus Stimulus Package, many American adults will soon receive around $1,200 each (+ extra if they have children) from the government. Additionally, self-employed workers are temporarily eligible for unemployment insurance, which provides weekly financial compensation while you’re out of work. You can learn more about these new benefits here. 

Federal and state governments, as well as local organizations, offer a variety of programs that can help you get food, health care, and housing. If you’re struggling with serious financial burdens right now, look into assistance options near you; these programs can provide a much-needed boost while you wait out the pandemic. Learn more about government assistance options here. 

Tip #5: See If Your Credit Card Issuer Is Offering Temporary Relief

Credit card bills are financial obligations you want to prioritize. Don’t assume you can skip any payments right now, and don’t panic spend! Though it seems like there’s a rush on food and toiletries, we are not experiencing shortages; only buy what your family needs to stay safe and healthy for a few weeks at a time. 

Some banks, like Bank of America, are allowing their members to temporarily defer their credit card payments. Others are waiving or reducing fees for personal loans. If the current pandemic is hurting you financially, contact your bank and see what help they can offer. You can also see many major banks’ COVID-19 policies in this guide by NerdWallet. 

Tip $6: Take Advantage of Current Tax Changes

Did you know that the tax deadline has been extended to July 15? If paying taxes would be a financial stress right now, you can wait a few more months to file your return. If you expect to get a tax refund and paying now to file is not too much of a burden, consider filing your taxes ASAP; you’ll get your refund sooner!

When it comes to IRA accounts, the IRS has temporarily waived their usual 10% early withdrawal penalty; this is beneficial if you need to tap into your IRA account for some cash. You will be allowed to spread out your income tax payments on that cash over the next three years. 

Inside tip: IRA contributions for the 2019 tax year have also been extended until July 15. If you haven’t hit your contribution limit and you have savings available to invest, this may be a good opportunity to maximize your IRA contributions and save in tax dollars. 

For additional COVID-19 resources, please visit our guide here.