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Financial Mistakes You Don’t Want to Make During the Pandemic

The recent coronavirus pandemic has got everyone on edge. As millions of people are unemployed or working with a lower combined household income, they’re stressed out wondering how they’ll continue to provide for their families. This heightened level of stress and anxiety has unfortunately caused some individuals to make financial moves in a haste. Though these moves may provide temporary relief, in the long run, it could be a mistake they live to regret.

Borrowing on Retirement Accounts

Whether you need to pay your mortgage or put food on the table, borrowing from your retirement account may not be the best move to make. Not only does this dip into an investment you’ve made towards your future, but it can leave you with a hefty bill later on.

When you take funds from your retirement account, you’re essentially taking out a loan. You will be expected to repay the loan and interest within a certain timeframe. If you’re unable to make these payments, it will count as an early withdrawal and will result in high tax penalties and fees.

Though the hope is that things will go back to normal sooner rather than later, what happens if you’re suddenly laid off or the company you’re working for goes out of business? You won’t have the means to repay the loan and can face some serious consequences financially.

If you’re still employed but going through a difficult time financially, it would be advised to consider installment loans to tide you over. They are often a lot more flexible than traditional bank loans, so getting approved shouldn’t be too difficult. They offer flexible repayment options and also don’t come with the financial backlash that could come from borrowing on your retirement account.

Selling Stock Too Soon

Since the onset of the coronavirus pandemic, the stock market has dropped to record lows and jumped back up to record highs. Though it can be a bit scary to see these changes, it is imperative that you don’t panic. In some instances, it may be ideal to sell your stock to prevent too much loss, but as an investor, you should know that sometimes you have to be willing to take a big risk to get an even bigger reward.

There is a such thing as selling your stock too soon. You sell with the hopes of not losing too much, only to find that a week or two later that stock has doubled in value. Essentially, you’re missing out on the opportunity to bank some serious cash. So, before you take the dive off the deep end, it is highly recommended that you think long and hard about selling. Pay attention to the market over the course of a week or so to see how things level out or talk with an experienced investor or broker to get a better understanding of when the best time to sell would be (if at all).

Withdrawing Money From the Bank

As many businesses are in dire straits as a result of the coronavirus pandemic, many people are wondering if banks will be next. If consumers aren’t opening accounts, taking out mortgages, or applying for loans, how will these institutions make any money? If the banks go under, what happens to your money? As a result of these fears, there are some individuals who have opted to withdraw their cash and instead keep it close to them at home.

There are a few problems with this type of thinking. For starters, there are some establishments that would prefer credit or debit card payments to reduce the handling of cash during the pandemic. With online shopping being the only way to acquire some of the things you want and need, if you don’t have cash in an account, you won’t be able to purchase it.

Another factor to look at is if your money is at home you’re missing out on the accrued interest you could be earning simply for having your money sit in an account. Lastly, should something happen such as a water leak, house fire, natural disaster, or robbery, your money is not insured as it would be in a bank. Meaning, there is no way to get this cash back. This is especially true for renters who don’t have the same protections as homeowners.

While having some cash on hand is ideal, it would be safe to say that keeping your money in a federally insured bank is the safest bet during this pandemic.

The coronavirus pandemic has, without a doubt, put many households in a pickle financially. Be that as it may, making poor financial decisions for temporary relief isn’t the answer. As you can see from above, each of these moves could have serious consequences down the line. It is advised instead to stay calm, conserve your financial resources, and, turn to the financial lifelines that have been provided by the federal and local government.