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Financial adviser's advice on how to get through this economic crisis

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Posted at 10:04 PM, Apr 27, 2020
and last updated 2020-04-28 20:15:59-04

The COVID-19 pandemic has turned out to be a financial nightmare for families who have lost their jobs and have just no clue how they're going to make ends meet.

Diane and Darryl Strand are among thousands of Arizonans who lost a big chunk of their income overnight, as they were forced to shutter their businesses.

The entrepreneurial couple owned five businesses, only one of which was deemed 'essential' by the state. They include a tattoo parlor, a tanning salon, a CBD side business, a clothing company for sand duning enthusiasts, and a sign shop.

While the sign show was considered an 'essential business' Diane Strand explained that they catered to small businesses, many of whom were shuttered, just like them so there was virtually no business coming in.

The Strands said both the federal and state governments should have had a better plan in place before ordering business owners to close up shop.

"I feel like they just said lock your doors. Do what we say and we'll let you know when you can come back, that's being blindsided right there," said Diane Strand.

Being left high and dry to fend for themselves, the couple found themselves with pretty much all of their monthly income gone. With savings also dwindling, the Strands wondered how they would pay their bills and keep the lights on next month.

They were not alone. So many Arizona families have found themselves facing a similar financial crisis. ABC15 took their concerns to a personal financial advisor to see how families in need can attempt to get through this tough time.

"This is the time to get drastic," said budget doctor Mike Sullivan, with Take Charge America, a non-profit credit management and debt relief service.

"This is the time to say no, I do not need cable television. No, I do not need this particular wireless plan with my cell phone. It may even be time to think about insurance policies. You can try to get a less expensive policy or even less coverage," advised Sullivan.

The CARES act signed into effect by Congress had a relief provision in it stating mortgage companies could give you a 'forbearance' or let you delay making payments on your loans, but is that a good idea?

The Strands tell ABC15 they learned there was a catch, at least with their mortgage company.

"They're willing to help us, but they come back with it has to be paid at the end of three months, and there's no way we're going to have that lump sum by then. We're not working," said Diane Strand.

ABC15 took that concern to Sullivan. He had some harsh words for mortgage companies who are telling customers to pay up within three months, under the ruse of 'helping.'

"I don't think you should owe it in a lump sum in three months. I think that mortgage companies are certainly taking advantage of consumers by insisting on that/ I think it's frankly an evil practice. Forbearance should be to add those payments to the end of the mortgage and I think that congress will take care of that. I think they recognize the evil," said Sullivan.

The CARES act also allows you to withdraw money from your 401-K retirement account penalty-free during this crisis, but Sullivan warned, that should be a last resort.

"If you are borrowing from yourself, you'll never pay it back," said Sullivan. He said the younger you were, there may be time to catch up, but if you were 50 or older, he advised it was a terrible idea.

"Remember it is still taxable, you'll have three years to pay the taxes on it," warned Sullivan.

Many utility companies have reached out to customers letting them know they would not be cutting off services during the pandemic. Sullivan said giving yourself a short break from paying a utility bill might be okay if your utility company allowed it, but he also advised customers not to get too far behind in those bills. He recommended alternating them if you were in a bind.

"Say okay, this month I"m going to pay the electric bill, next month the gas bill, the next month the water bill," said Sullivan.

He added that this was not the time to worry about your credit, but those who could, should look for another way to bring in some income.

Diane Strand just took on a job working at a valley grocery store to help supplement their income, until they got the green light to open up their small businesses.

"That salary from the grocery store, that means I might be able to keep my cellphone on and hopefully pay an electric bill and a water bill," said Strand.

Their sign shop is now making "essential worker" decals small businesses can display. You can order one by emailing diane@dianesrapidsigns.com. The decals cost $5 each.