It's more important than ever for us to get into conserve mode: Financial Expert
Financial Expert & “Everyday Millionaires” Author Chris Hogan joins Yahoo Finance’s Zack Guzman to discuss how Americans should be preparing for a potential income reduction and what people can do if they can’t pay their bills on April 1.
Video Transcript
ZACK GUZMAN: Meantime, as more and more coronavirus cases spread across the globe and here at the US, as we've seeing cases in the US surpass that of any other country, President Trump has been warning that we're about to be entering a very tough stretch of time here. And it's not just us as citizens. American families are going to be bracing for budgetary impacts here as well.
And if you do believe that this is our war against an invisible virus, we're asking what you should be prepping for in terms of preparing a wartime budget. And right now, I want a bring on Chris Hogan. He's the author of "Everyday Millionaires," and financial expert, and friend of the show. Chris, it's good to see you again.
When we're talking about how Americans should be prepping for this, what are you telling people the way that they should be kind of digging through their own finances and figuring out how much they should be saving, how much they should be spending? What are you telling them?
CHRIS HOGAN: Well, Zack, it's always good to be with you. I appreciate the help you are giving everyday people out there. Right now, in these unprecedented times, it's more important than ever for us to get into conserve mode. We've got to begin to look at things a little bit closer and be much more intentional.
79% of people are living paycheck to paycheck. But another stat that I found that's really blown me away is 1 in 4 people are spending more than half of their monthly income on rent and mortgages. And so we are headed for a very, very tough time, where people really need to recenter themselves and know how to handle this income reduction moving forward.
ZACK GUZMAN: Yeah, and one of those things, too, we talked with the FHFA director yesterday about forbearance on some of these mortgages or rent, you know, help that's been given there. What advice are you giving in terms of getting out ahead of it and making sure that Americans who might fall into that situation are able to kind of address this sooner rather than later?
CHRIS HOGAN: Well, the first thing is, is I want people to pause and take a deep breath. This is unprecedented territory. And this is going to last for a while. And so we've got to get our wits about us.
The next step is, is understanding we've got to take care of the necessities. We've got to be adult enough to tell wants they need to wait. And what I mean by that is we've got to take care of the four walls, and by four walls, I'm talking about your shelter, your rent or your mortgage, your utilities, food, and transportation. And a lot of people are finding out that they're running out of money before the end of the month.
And so if you are in that crunch, I want you to be proactive. I want you to make a list of your creditors, write down the account number and how much your normal payment is. And I'm wanting people to do that so they can start to see and understand where they fall and what it is they need to do.
The next step is you've got to start to make some cutbacks. We've got to cut out that gym subscription or that unneeded subscription that's automatically being debited from your account each and every month. The gym is closed. You can't go to it. So let's save yourself $150 a month right now by canceling that, contacting them and closing it out.
The next step is, is find some part time work. You know, a lot of the food deliveries out there are booming right now because people are at home. So we've got to start to think differently about it.
And Zack my final tip is this. A lot of people are finding they just don't have the money. And I tell people if you don't have the money to pay, you can pay attention. And by paying attention, I mean reach out and contact the creditor before they call you. Call them, get them on the phone, and I want you to explain your situation.
I want people out there to realize you're not the only one going through this, but you can be one of the only few that are being proactive and calling. And I tell people you've got to advocate for yourself with a credit card. If you don't have that money, you need to let them know. Don't make a promise to pay just to get off the phone. And so many people will do that because they're nervous.
So we have to advocate for ourselves. And I tell people, you're not debating with the creditor. You're stating the fact. I don't have the money, but I'm going to contact you once each week to talk to you about what I'm doing to try to improve my situation.
ZACK GUZMAN: Yeah, and it's good advice, too, just because you think about how this can come back to bite you when you think about credit. And even if you do move past this, once we get through this, how that'll stay-- they make a good effort to make sure that it stays with you.
Lastly, though, just want to talk about students out there, because I know Millennials are watching this, they might not have the added overhead of having to provide for a family, but if they do act like other Millennials that I know, they will have a large amount of student debt. So what are you telling them because that falls into the same kind of situation here where we did see federal aid come to kind of hitting the pause button on those interest payments?
CHRIS HOGAN: Yeah, it did. And with the moratorium on student loan payments until September 30, I'm advising people this. If your income is stable, then I want you to continue to make payments. It's a great opportunity for you to get ahead of this without the interest or late fees. And so it's a great chance to attack debt. And as you well know, I'm a fan of doing that.
However, if your income has been reduced, cut, or lost, what you're going to do is really take time to collect yourself and understand this stimulus check is not to have fun on. It's going to be needed for the necessities that we talked about earlier.
ZACK GUZMAN: All right. Chris Hogan, the author of "Everyday Millionaires," thank you so much for sharing us that advice. Appreciate you joining us sir.
CHRIS HOGAN: Thank you, my friend.
