Even before Atlanta had an official shelter-in-place order, patients at Dr Nicholas Jones' private plastic surgery practice began canceling and rescheduled planned procedures.
After a few weeks, Jones, 40, stopped seeing patients entirely, but as a self-employed independent contractor, that means he's lost most of his income. Jones still makes some money via a wound care job at a local nursing home, but he's concerned that job may also be eliminated.
"I'm not hurting yet," he says. "But I'm preparing for the worst possible scenario."
In preparation, he and his fiancé have cut back on extraneous expenses like Uber eats, magazine subscriptions, and streaming music services. Even though he has a 6-month emergency fund, Jones has reached out to utility companies, mortgage lenders, and student loan servicers to find out about any programs they offer to people who've suffered financially from the coronavirus crisis.
He's also considered traveling to one of the COVID-19 epicenters — he has family in New Orleans and Chicago — to work in a hospital there. Jones has trauma experience and is double-boarded in general and plastic surgery.
"I could provide relief to those in need and also float through this troubled time with some financial relief," he says.
Whereas much of the world's attention has been on physicians on the frontline, working around the clock in hospitals to help COVID-19 patients, thousands of other physicians are experiencing the opposite phenomenon — a slowdown or even stoppage of work (and income) altogether.
Many practices are temporarily closing to meet social distancing requirements, and some may end up closed for months, leaving doctors without a source of income. Even among those practices that remain open, the number of patients has declined as people avoid going to the office unless they absolutely have to.
At the same time, doctors in two-income households may have a spouse experiencing a job loss or income decline. Nearly 10 million Americans applied for unemployment benefits in the last two weeks of March, the largest number on record.
Still, while there's uncertainty around how long the coronavirus crisis will last, experts agree that at some point America will return to a "new normal" and business operations will begin to reopen. For physicians experiencing a reduction in income who, like Jones, have an emergency fund with a few months' worth of expenses, now's the time to tap into it (Or if you still have income, now's the time to focus on growing that emergency fund to give yourself an even bigger safety net.)
If you're among the more than half of Americans with less than 6 months of expenses saved for a rainy day, here's how to stay afloat in the near term:
1. Cut back on expenses
Some household spending has naturally tapered off for many families, as social distancing restrictions reduce spending on eating out, travel, and other leisure activities. But this is also an opportunity to look for other ways to reduce spending. Look through your credit card bills to see whether there are recurring payments you can cut, such as a payment to a gym that's temporarily closed or a monthly subscription box that you don't need.
Some gyms are not allowing membership termination right now, but it pays to ask. If a service you're not using won't facilitate the cancellation, call your credit card company to dispute and stop the charges, and report them to the Better Business Bureau.
You should also stop contributing to non-emergency savings accounts such as your retirement fund or your children's college funds.
"A lot of people are hesitant to stop their automatic savings if they've been maxing out their 401(k) contribution or 529 accounts," says Andrew Musbach, a certified financial planner and cofounder of MD Wealth Management in Chelsea, Mich. "But if you're thinking long term, the reality is that missing a couple of months won't make or break a plan. Cutting back on the amount you're saving in the short term will increase your cash flow and is a good way to make ends meet."
2. Take advantage of regulatory changes
Although many physicians won't qualify for direct payments via the Coronavirus Aid Relief and Economic Security (CARES) Act (the $1200 payments to individuals start phasing out once income hits $75,000 and disappear entirely for those making more than $99,000), there are other provisions in the stimulus bill that may help physicians. The bill, for example, boosts state unemployment payments by $600 per week for the next 4 months, meaning qualified workers could receive an average of nearly $1000 per week, depending on their state, and there are new provisions providing unemployment payments to self-employed and contract workers.
The CARES Act also includes a break for federal student loan holders. Under that rule, you can skip your payments through September without incurring additional interest. Physicians in the loan forgiveness program will still get credit for payments skipped during this program.
Separately, the IRS has extended the tax deadline from April 15 to July 15, which means not only do you not have to file your taxes until then, you also don't have to pay any taxes you owe until mid-July. The deadline for first quarter estimated tax payments has also moved to July 15. (If you're expecting a refund, however, you should file ASAP, since the IRS will typically issue those within a few weeks of receiving your returns.)
3. Tap your home equity — if you're planning to stay put
If you have good credit and still have some income, you might consider refinancing your home mortgage or opening a home equity line of credit. Interest rates have fallen recently amid economic turbulence, so if you haven't refinanced recently you may be able to shave your monthly payment. If you need cash, a cash-out refinance, home equity line of credit, or a reverse mortgage (available if you're over age 62) are among the lowest-cost ways to borrow.
"With interest rates so low, there can be a lot of benefit to refinancing and leveraging your house, especially if you're planning to stay there," says Jamie Hopkins, a director at the Carson Group. "The challenge is if you're planning to move in the next few years. There's a real risk that the housing market could go down in the next couple of years, and if you're planning to sell, there's a risk that you might not get back what you borrowed."
4. Communicate early with your bank or landlord
If you don't have the income to refinance, and you think you're going to run into trouble making your housing payment, you should let your bank or landlord know as soon as possible. The CARES Act allows homeowners with federally backed mortgages to obtain a 180-day postponement of mortgage payments because of COVID-19 financial hardship, with the potential to extend for another 180 days. It also bans eviction by landlords with federal mortgages for 120 days.
Even if you don't have a federally backed mortgage, you should still get in touch with your lender. Many mortgage servicers have their own forbearance programs for borrowers who can prove a temporary financial hardship. (Some banks are also waiving fees on early withdrawals on CDs and giving cardholders a reprieve on credit card payments.) Commercial landlords are also working with struggling tenants, so you may also be able to get some relief on your office lease as well.
"All of the lenders are setting up helplines for people affected," says Amy Guerich, a partner with Stepp & Rothwell Inc, a Kansas City-based financial planning firm. "The best thing you can do is contact them right away if you think that you're going to have a problem vs just letting the bills go."
5. Consider retirement account withdrawals
Standard personal finance advice holds that you should exhaust all other options before pulling money out of your retirement account because of the high penalties for early withdrawals and because money removed from retirement accounts is no longer compounding over time.
Still, the CARES act has provisions making it less financially onerous to pull money from your retirement accounts. Under the new law, you can take a distribution of up to $100,000 from your IRA or 401(k) without having to pay the 10% early withdrawal penalty. You'll owe ordinary income taxes on the withdrawal, but you have three years to pay them, or to return the money to your retirement account.
"That's a great relief provision, especially for higher income physicians who might have a higher 401(k) balance," says Jamie Hopkins.
6. Be smart about credit cards
Although using credit cards that you can't pay off every month is typically an expensive way to access money, getting a new card with a low or zero percent introductory rate is a short-term strategy to consider when you've exhausted other options. If you have good credit, you may be able to qualify for a credit card with a 0% introductory interest rate on new transactions. Pay close attention to the fine print, including the cap on the balance you can carry without interest and whether you'll be required to make minimum payments.
The average 0% credit card offer is for 11 months, but there are some cards that can extend the offer for up to a year-and-a-half. If you choose to use this strategy, you'll need a plan to pay off the entire balance before the introductory period ends. If there's a balance remaining once the rate resets, you may end up owing deferred interest on it.
The financial ramifications of the coronavirus can feel overwhelming, but it's important not to panic. While it remains unclear how long the current crisis will last, making some smart money moves to preserve your cash in the meantime can help you stay afloat.
Beth Braverman is a freelance financial writer based in New York City.
Medscape Business of Medicine © 2020
Cite this: Money Worries During COVID-19? 6 Tips to Keep Your Finances Afloat - Medscape - May 27, 2020.