In our last blog, we talked about Mary and Bob who took a distribution from Bob’s 401(k) account under the provisions of the CARES act. Bob and Mary are in their 40s, have two children, and suffered financially due to COVID 19. In that scenario, we discussed that taking the distribution probably was not the best plan of action for them if other options were available. Here are some other options Bob and Mary could utilize to ease their financial burdens.
Talk to Their Mortgage Lender
Many lenders have programs to help borrowers who have a temporary financial crisis. Bob and Mary’s bank might allow them to make partial payments or interest only payments. Most lenders are very willing to work with their customers, especially when the customers reach out to them before getting behind in their payments.
Refinance Their Home
Mary and Bob could take advantage of the current low interest rate environment and refinance their home. This makes sense if the interest rate will be significantly lower than their current rate. This option may reduce Bob and Mary’s mortgage payment and help ease their financial burden. If they have equity built up in their home, Mary and Bob may be able to borrow extra to help them through the rough patch they are currently experiencing.
Explore Work at Home and Unconventional Childcare Opportunities
Many employers are allowing their employees to work from home. This option might ease the childcare issue for Mary. If there are times that she needs uninterrupted work time, Mary could check with family, friends, and neighbors to see if they could work out childcare trade-offs. Perhaps Mary’s busiest part of her workday is in the morning and her neighbor Susan’s busy time is in the afternoon. Mary could offer to watch Susan’s children in the afternoon while Susan watches Mary’s children in the morning. Of course, COVID precautions need to be taken into account so that everyone is protected from spreading the virus.
We are dealing with unprecedented times and it’s having a negative financial effect on many families. If you are experiencing financial hardship, there are many options available to you depending on your situation. If all else fails, you can turn to your 401(k) under the CARES act, but I usually recommend this only as a last resort. If you have questions about your financial situation, please reach out. I’d love to visit more!
Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.
