Four steps to rebuild your financial life after covid After the storm comes the cleanup — and the quandary of what to fix first. The devastation following Hurricane Ida made me think of the monetary wreckage wrought by the coronavirus. The pandemic hasn't flooded any homes, but it certainly has caused a lot of financial damage. There are millions still in the midst of this economic storm. The end to the national eviction moratorium for renters will no doubt leave many people without a secure place to live. Others are still out of work or have had their hours cut as the United States continues to battle an increase in coronavirus cases. But many people are starting to recover. They are back to work. They have been able to negotiate to stay in their apartments or hold on to their homes. So the question you might be asking is this: What should I do now if I'm in the recovery phase of the pandemic? Here are four steps to financial recovery after covid: Get caught up. In the first stage of your recovery, focus on catching up on overdue bills or loans. If you're about to exit a forbearance for your home or other loans or credit card debt, make sure you are negotiating a repayment plan you can manage. Under the Coronavirus Aid, Relief and Economic Security (Cares) Act, borrowers with federally backed mortgage loans could ask for an initial forbearance of up to 180 days. If additional relief was needed, they were entitled to a 180-day extension. Interest still accrues, but fees and penalties are waived. The Biden administration has extended the forbearance enrollment window through Sept. 30. Borrowers with mortgages covered by the Cares Act have a number of repayment options, including taking the delinquent balance and adding it to the back end of the loan. The past-due payments would effectively extend the term of the loan. If you deferred other debt, work with your creditors to come up with a realistic plan to catch up. Please, don't promise what you can't afford. If you need help negotiating with creditors, get assistance from a nonprofit consumer counseling agency by going to the website for the National Foundation for Credit Counseling (nfcc.org). You can also call (800) 388-2227. Replenish your rainy-day fund. The pandemic unleashed a flood of financial strife that may have decimated your emergency fund, and that's okay. If you're able, start rebuilding this all-important safety net (or start one, if you never had a rainy-day fund). You might be inclined to concentrate only on paying down your debts, but don't ignore the need to have a small savings cushion. If you don't save something and you have a financial emergency, your only option may be to borrow again, and you want to avoid this while you're in recovery mode. Although the recommended stash is three to six months of living expenses, don't put too much pressure on yourself to reach that goal right away. Start with enough savings that will get you to your next paycheck. Here's another important thing to consider. In a June CreditCards.com survey, more than 4 in 10 U.S. adults said they were willing to take on debt for discretionary purchases in the second half of 2021. I know you may be anxious to treat yourself now that things are better, but don't splurge until you've stabilized your financial situation, and that means having a healthy emergency fund. Repair your credit. Start by taking a look at your credit reports from the three major credit bureaus: Equifax, Experian and TransUnion. You can get your credit report via AnnualCreditReport.com. Federal law entitles you to a free copy of your credit report every 12 months from each credit reporting company. But during the pandemic, the three credit bureaus are giving consumers free access to the reports on a weekly basis. The offer was supposed to have ended this year. However, Experian, Equifax and TransUnion announced that free weekly access to credit reports will be extended until April 20, 2022. Your bank or credit card lender may offer a free credit score. If it does, definitely take a look. If none of your financial institutions offers a free score, I like the free credit-score report from Discover at creditscorecard.com. There are no shortcuts to strengthening your credit score. You do not need to pay any company to help you restore your credit history if it took a hit during the pandemic. Under the FICO credit scoring system, 35 percent of your credit score calculation is your payment history and 30 percent is determined by how much debt you're carrying. The two major ways to improve your credit are paying your bills on time and reducing your debts. Seriously, that's it. Rebuild your retirement savings. If you stopped saving for retirement or reduced your contributions, get back into this habit once you have a better footing on your finances. If your company offers matching contributions, put in enough to get the match. But if you're still deeply in debt or lack emergency funds, start there first and then boost your retirement savings next. The important thing is to take it slow and not feel rushed to get back on track if you lost your job or had a disruption in your income. Your recovery from the financial calamity the coronavirus caused might be a long process, so give yourself permission to take as much time as you need to rebuild after this storm. Reader Question of the Week If you have a personal finance or retirement question, send it to colorofmoney@washpost.com. In the subject line, put "Question of the Week." Please note that questions may be edited for clarity. Q: I want to use a portion of my savings to help my granddaughter pay for expenses related to her college education. Like other retirees (I am 83), I have no idea how many years I have left. How should I proceed? A: What a wonderful gift of financial freedom you could give to your granddaughter if you can help her pay for college expenses, perhaps reducing or even eliminating her need to borrow for college. But you are right to be prudent not to impact your retirement security. So, definitely look at your savings and current financial needs. Make sure you have a cushion for long-term care expenses, which are not covered by Medicare. While it's hard to predict how much you might need, you can look at current and projected healthcare expenses to determine if you have extra to give. You might want to talk to a fee-only financial planner who can walk through your numbers and help you determine what portion of your savings you can carve out to help your granddaughter. Here are some links to articles to help you find such assistance. What You Need to Know About Fee-Only Financial Advisors Fee-Only Financial Planner vs. Fee-Based: What's the Difference? Financial adviser, financial planner or robo-advisor? Here's how to find the right help to manage your money Genworth has a "Cost of Care Survey" tool that can be very helpful in anticipating long-term care expenses in your local area. Once you've determined how much you may be able to spare, you could save the money for your granddaughter's college expenses in a 529 plan. Here are a few columns I've written on this savings vehicle. 529 plans can help you save for college, so let's get started with the basics What people get wrong about 529 college-savings plans Even if your child is just a few years away from college, it's not too late to fund a 529 plan Also, read: This is the worst financial mistake a grandparent can make In Retirement News Part of planning for retirement and then living on the money you've saved or invested is keeping up with the issues that you need to know. In this section, I feature blogs, news stories, new research, surveys and government policy changes that could affect your retirement. If you see a news story or issue you think would help folks, let me know and I'll check it out and share it with newsletter subscribers. Thinking of getting an annuity for retirement? Here's a great article from Morningstar on the pros and cons. Read: Do You Need an Annuity for Retirement Income? Some guidelines on figuring out if an annuity makes sense for you, and if so, how much to allocate Retirement Rants and Raves What are your thoughts about saving for retirement? If you're retired, how is it going? What advice would you have for others about retirement? This is your space to rant or rave about anything related to retirement. Send your comments to colorofmoney@washpost.com. Please include your name, city, and state. In the subject line put "Retirement Rants and Raves." Responses may be edited for clarity. One reader was not happy about the headline on my column last week: Your 401(k) is pocketing fees on your investment. Many people don't realize it. "I read your column regularly and enjoy it very much," she wrote. "But I have to strenuously object to the headline. I am the administrator and fiduciary of a $30 million plan. We work hard to teach our employees financial literacy and how to understand confusing language in some of the documents they get. We are probably the exception. But let's be clear — no 401(k) is 'pocketing' fees. This headline makes it sound like EMPLOYERS, or the plan itself, are making money off participant fees. It implies stealing, or doing something inappropriate, or taking something you haven't earned. Certainly, some fund fees are excessive, but even if a plan fiduciary is doing a poor job of controlling costs, fees are NOT secret and are not unearned, regardless of whether someone understands what they are reading." As I wrote in the column, fee disclosures aren't good enough. The Government Accountability Office (GAO) found that 64 percent of plan participants don't believe they are paying any fees or are unsure whether they are. It's important companies do everything possible to ensure employees understand that there is a cost to providing retirement plans. I'm looking for 401(k) or TSP Millionaires There are a growing number of workers who have reached the millionaires' club — at least before taxes. Despite the economic upheaval of the pandemic, 401(k) balances hit record levels in the second quarter and are creating a record number of millionaires, according to Fidelity Investments. If you've joined this club, I would like to hear from you for a future project. I'm hoping to show workers starting out how it's possible to become a millionaire in their workplace retirement plan. If you'd like to share your story, email me at colorofmoney@washpost.com. In the subject line put "401(k) or TSP millionaire." | 
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