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7 cash flow tips for tough times

Facing a cash crunch? You are not alone. See how to find extra cash.

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Key takeaways

  • Look for ways to trim nonessential household expenses including monthly subscriptions or memberships that you don't use on a regular basis.
  • Consider refinancing your home as a way to improve your cash flow.
  • If you qualify for the government stimulus package, make a plan for how to best spend the money.

If you're concerned about the amount of cash coming into and going out of your accounts of late, you're not alone. Job losses, the market downturn, and the threat of recession have caused many people to wonder about whether they have enough cash flow to keep their households running.

Now is the time to look for ways to boost your cash on hand, so you can get through this period without running up debt or tapping into your retirement savings.

Consider the following tips to help boost your cash flow.

1. Understand what cash flow means to your budget

The term "cash flow" comes from the business world. It refers to the amount of money you have coming in compared to the amount you have going out. The goal, of course, is to have at least as much cash coming in as you do expenses.

It all starts with a spending plan. Know what you earn, what it costs you to live, how much you can save, and, of course, where you spend your money.

Read Viewpoints on Fidelity.com: 50/15/5: a saving and spending rule of thumb

2. Get your share from the government

You may have access to one or more sources of government funds:

  • The stimulus package passed in March 2020 contains relief for taxpayers, the unemployed, small-business owners, and others. Check carefully to determine whether you're eligible for one or more sources of relief.
  • The IRS has extended the tax filing deadline to July 15, 2020. If you're getting a refund, file as soon as possible to get your check.

3. Ask for refunds

You may be able to recoup some costs of travel or entertainment plans that have been upended by the pandemic. Policies vary widely:

  • Many airlines and cruise lines are offering credits for future travel rather than cash refunds. If an airline cancels your flight before you do, you are generally entitled to a cash refund. Check company websites for details.
  • Prepaid hotel, home share, or rental car reservations are likely to be refunded.
  • Many performing arts and sports venues are processing refunds for canceled events automatically. Check your credit card statements to see if refunds have been processed.

4. Look for lower prices and payment freezes

One way to improve your cash flow is to pay less for the items for which you've already budgeted. Here are a few ways to be proactive and cut costs:

  • Some landlords are reducing rents. If yours hasn't announced such a policy, ask.
  • If you're paying tuition bills for a college student, consult the school to see if it's offering refunds for housing or food plans. If you need a break on your tuition payment plan, contact the bursar's office to see what they can do for you.
  • Pay cash at the doctor's office (it may be cheaper than running your claim through your insurer1).
  • Call your credit card company to see if it will reduce your interest rate. Another option: Consider opening a new line of credit with a lower interest rate and transfer an existing credit card balance.

5. Postpone payments if you can

Postponing bills can make a big difference in your short-term cash flow. You can have the most impact by putting off major purchases that you haven't made yet. Then look at your biggest monthly bills:

  • Some mortgage lenders are offering to defer or modify mortgage payments.
  • If you have federal student loan debt (including loans taken out by parents for their kids), you may be able to stop making payments through September 30, 2020, with no penalties or additional interest.2 Check with your loan servicer for details.
  • Since the deadline for filing federal income tax returns has been postponed to July 15, you have 3 more months to file and pay. (Many, but not all, states have moved their deadlines to match the IRS.3)
  • Some credit card companies are letting customers skip a payment.4

6. Cut household expenses

Tough times may call for tough measures—including cutting back on your household budget. Brad Davis, CFP®, a Fidelity advisor in Austin, Texas, helped a recently retired client reassess both his discretionary and essential spending. "He didn't need a landline anymore, downgraded his TV package, and reduced his insurance coverage on a 15-year-old car to liability only," Davis says. "All told, those changes freed up more than $200 a month to add to his emergency savings fund."

Sheltering in place may result in savings on commuting costs or discretional expenses like entertainment. It's also a good idea to try to lower what you pay for essentials:

  • Auto and homeowners' or renters' insurance: Check your current coverage levels and shop around to see if you can lower your premiums.
  • Energy bills: Lower your energy consumption where possible—for instance, set the air conditioner higher (or heat lower) by 1 or 2 degrees, and turn off lights and appliances when you're not using them. Also, convert old lightbulbs to LEDs to save money.
  • Household maintenance: If you typically pay for house cleaning, landscaping, or pool maintenance, consider taking those tasks on yourself.

7. Borrow wisely

You may also decide to explore borrowing as a way to improve your cash flow, especially since some interest rates are at historic lows:

  • Home equity line of credit: Your payment is based on how much you've borrowed at any given point in time, as well as your current interest rate, so shop around to get the lowest rate.
  • Mortgage refinancing: If you have substantial equity in your home, you might consider a cash-out refinance. You can potentially lower the interest rate on your loan and gain access to a substantial amount of cash. However, this option should only be used for an emergency. For other refi tips, read Viewpoints on Fidelity.com: Should I refinance my mortgage?
  • Workplace savings account loan or withdrawal: If absolutely necessary, a workplace plan loan may be an option as a last resort. For those who qualify, there is also the CARES Act withdrawal of up to $100,000 without the usual 10% penalty, but you need to show that your situation was COVID-19 related. Check with your workplace savings plan provider to see if these options are available.

For many people, these are difficult financial times. But no matter your situation, there are steps you can take to make navigating them easier. Begin by methodically assessing your cash flow options. That should help you gain control over your finances as you move forward.

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