Market Overview

Managing Cash Flow During COVID-19

Managing Cash Flow During COVID-19

We are in a time of great uncertainty, both for our health and for our finances. 

The economic freeze brought about by COVID-19 has put the personal finances of millions of people in the crosshairs. Right now, they’re asking the same questions: Will I be able to pay my bills? How far will my emergency fund go? Where should I cut back?

When it comes to matters of the wallet, there is no “right” decision. Managing money during times of uncertainty is almost entirely dependent on individual circumstances. This article’s aim is to work as a helpful guide for managing cash flow during COVID-19, while keeping in mind everyone’s differing circumstances.

Start With Your Stimulus

By now, the vast majority of Americans should have received a stimulus check from the federal government, or they will soon. On average, this amount will be around $1,200 depending on a variety of factors (e.g., 2018/2019 tax return, income, dependents, marital status).

In deciding what to do with this dollar amount, let’s look first at covering the essentials. 

If you’re fortunate enough to still have a steady paycheck coming in, it may be best to put the stimulus check in a liquid (easy to access) savings account to give yourself more of a cushion. If you’ve already got ample savings, the smartest option is to pay down debts (starting with the highest interest rates). 

For those who aren’t receiving a paycheck or have debts and responsibilities looming overhead, consider speaking with your landlord, mortgage lender, credit card provider, bank, etc., to see if you can get your payments halted. If you’re able to reach agreement on one or more of these approaches, consider using the stimulus check for essential items (food, medications, etc.). 

When In Doubt, Save

Save, save, save. Saving as much as you can after you pay for essentials will give you the greatest peace of mind in the coming months. As uncertainty continues over when the country will open back up, you’ll never regret having a safety net to fall back on (at least three months’ worth of expenses is considered a rule of thumb). 

Remember to also put money aside for taxes if you’re self-employed. Try saving enough for estimated quarterly tax payments to avoid any penalties. AARP Foundation Self-Saver is one way to ease the stress that accompanies tax preparation; this free tool can help you manage your taxes now during quarantine, and once the pandemic ends. The central feature of Self-Saver is an application that provides a tax calculator, automated withholding on 1099 income, expense itemization, and quarterly filings to the IRS. 

Map Out a Plan

A lot of our anxiety right now is around control — or lack thereof. We can’t control when the virus will stop spreading or when our economies will reopen. But creating a financial plan for the next coming months will help you take back some sense of the control you’ve lost. 

Try to prioritize the essentials (house bills, food, medicine, taxes); then, if you can, allow some room for unforeseeable events. 

If you’re able, consider putting money into local small businesses to stimulate the economy and help keep them going. It may also be worthwhile to invest any supplemental income (e.g., the stimulus check) in a retirement account or a college fund.

And if you’ll be staying home for a while longer, look for ways to supplement your income and increase your cash flow. There are numerous opportunities right now to earn money without leaving your home. 

Everyone’s situation is different — but planning ahead by managing your money is a good idea under any circumstance.

Photo by Sharon McCutcheon on Unsplash


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Posted-In: AARP budgets Covid-19 Self-SaverPersonal Finance General