Short on cash? Here's some advice for families stretching their budgets

Forget living paycheck to paycheck. Many families have lost work during the pandemic and are running out of cash as they wait for unemployment checks and government rescue money to arrive.

These are highly unusual times, and family budgeting recommendations are also unconventional.

Kathy Hauer, a financial planner based in Aiken, S.C., says she's telling people to do things she has never recommended before: "Defer as many payments as possible and and worry about it later."

But, she says, don't just ignore all the bills. Make sure to call all the companies and ask for forbearance — either a delayed payment or a new payment plan.

This is an especially hard time for lower-income families who don't have a lot of wiggle room in their budgets, Hauer says. They may not be able to borrow money from other family members. If they have bad credit, they can't qualify for personal loans from banks. Many also don't have credit cards or are close to maxing those out.

Normally, personal finance experts tell people to avoid credit cards — and their high interest rates — like the plague.

But these days Greg McBride, a chief financial analyst with Bankrate.com, says, "This is the one time where it's OK to make minimum payments on your credit card." At least that will buy consumers some time for their bills and allow them to take care of necessities.

Here is some of their advice:

Make a list of all bills coming due in the next two months. Call each company and ask if they can delay your payment or put you on a more affordable payment plan.

On housing, student and medical loans

• See if you can get a break on your mortgage. U.S. regulators ordered loans backed by mortgage giants Fannie Mae and Freddie Mac to offer flexibility in mortgage payments for up to a year. Some banks are offering options to defer mortgage payments, for example. Either way, check the fine print, because some of those agreements come with harsh terms.

• For renters: Many cities have called for a halt to evictions, but without offering much additional guidance. Bigger companies might have more flexibility to accept late payments. Dyan Navejar, who lives in Lexington, Ky., says her landlord told her he isn't a conglomerate and needs her rent on time to be able to pay his mortgage payments. So, he told her, "It's business as usual."

• Student loans and medical loans often offer adjustments based on ability to pay. Student loans often adjust payments based on income, for example. Hauer, the financial adviser, says the same is true for medical bills. "Most medical providers will allow you to set up a payment plan, and most of them charge no interest or very low interest," she says, so don't put those bills on your credit card, where interest rates are much higher.

For other monthly services and bills

• Many water, electricity and gas utilities are not shutting off service, but be sure to confirm that you qualify for this program and ensure your service isn't accidentally cut off. Check with your Internet and phone providers, too.

• Review all recurring charges you might have on auto-pay. Cancel all unnecessary items, which might include cable TV, streaming music and other subscriptions.

Candace Grenier, a dental hygienist hunkering down in Anchorage, Alaska, lost her job last month. Both she and her son applied for unemployment benefits but haven't gotten them. "That's been kind of a struggle," she says. Unemployment offices "have been so overloaded with requests because there's been so many layoffs," Grenier says. The long list of services she has cut from her budget include cable TV and plowing her snowy driveway.

• Some choices are especially difficult. Take health insurance, for example, if you qualify. "You're really faced with a huge, huge choice because if you don't pay your health insurance and somebody gets sick, it can be a disaster," Hauer says.

In Orlando, Fla., this is a worry for Andrea Delacruz and her husband, both of whom have been out of work since last month. Her husband lost his job as a bus driver before they became eligible for health insurance benefits. To tide them over, her husband thinks about driving for Uber or Lyft. His wife worries that will expose the family to the coronavirus. "I'd rather not have money and owe a whole bunch of money [and] when everything is over, talk to people and try to see what they can do, [rather] than me risking my life," Delacruz says.

Shoring up cash

• Buy the necessary items first, like food and medicine — items that cannot be delayed. Try to save cash by using credit or loaned money for those items, if you can. "Lower-income households tend to run a much leaner budget to begin with and don't have those extraneous expenses that can be cut back," says Bankrate.com's McBride.

• If you need to borrow money, ask family or friends first. If that's not an option and you have good credit scores, you might also be eligible for a personal loan from a bank. Those interest rates are about half that of most credit cards.

• Make the minimum payment on the credit card and use it to buy food and other necessities.

• For those with retirement accounts, tapping them is a last resort because there are tax penalties for doing so.

• Find a free credit counselor. "They specialize in not only helping people budget, but they can also interact with your creditors," McBride says.

• Copyright 2020 NPR. To see more, visit https://www.npr.org.

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