Answering Your Personal Finance Questions

As we continue to navigate these unprecedented times, KCBS Radio is getting the answers to your questions about the coronavirus pandemic. Every morning at 9:20 a.m. Monday-Friday we're doing an "Ask An Expert" segment with a focus on a different aspect of this situation each day, sponsored by the San Francisco Police Department.

Today we’re tackling your personal finance questions with CBS News Senior Business Analyst Jill Schlesinger.

Jill good morning, how are you doing today?

I'm doing well. You have to plug one other thing that gives me legitimacy and that is, I am still and I still maintain my Certified Financial Planner certification because I'm never taking that test again.

Glad you reminded us of that because you - before you became a shining, beautiful face on television - sat down with people across a desk and had the hard conversations about finance. 

Yeah exactly. And you know, it's so interesting coming from where I did come from because I had the experience with real people. I didn't just write about it or talk about it. And you know what, there's something very different about that experience. In other words, I understood that advice that you provide to folks isn't always taken unless it is framed correctly. So you know, I pulled out all the stops. I gotta tell you I would try to guilt them into things, I'd make them feel bad about things - no I'm just kidding - but I would really try to find the way in to help show them why something was so important.

So we're in a time right now that none of us could have predicted. But you have been through some crises. Not just little ones for one family: somebody loses a job, somebody's injured at work, but bigger ones where a lot of people were similarly situated. I think back to a decade ago.

Yeah, what's really been kinda crazy about this time is we talk about these numbers - as you said, another three million people who claim unemployment benefits. And while I think that we all are very aware that we've lived through things in the past like the Great Recession or the dot-com boom and bust. We've never seen the rapid deceleration of the economy, the market, the job situation - we've never seen it deteriorate so quickly. And that's what's really taken everybody by surprise.

And you know, I remember when Warren Buffet used to say "when the tide goes out you see who's swimming naked." Well there's a point to that which is pretty important here, which is when things happen so fast some of the deficiencies in your own personal finances are revealed very quickly. Like I don't have an adequate emergency reserve fund, or I really don't know where I spend my money, or I didn't really ever have a plan B if things didn't go as well as I had hoped for.

Let's get to the questions, and a reminder you can send them to askus@kcbsradio.com

I keep hearing that the CARES Act opens up ways for people to tap into their IRA's and/or 401K's. What are the rules around that and should people be doing this?

So the CARES Act allows a couple of things. Number one is that it expands the ability for people who are under 59 1/2 to get money out of their retirement accounts and not pay a penalty. Normally if you're under the age of 59 1/2 there's a 10% penalty on the money you withdraw. And then also you have to pay taxes on the amount you withdraw. Well the 10% penalty is waived. The taxation is not. However, the government is giving you three years to pay back those taxes that are due. 

So pretend that you said "ok I've got $15,000, it's in a retirement account. I'm going to pull that out." No 10% penalty, $15,000 is added to your taxable income but the tax that is due on that withdrawal can be spread out over three years.

There's also some rules loosened for borrowing. And in terms of what should you do, it's awfully hard for me to recommend doing this unless it's a bit of a break the glass scenario, because it's so hard to get money back into retirement. And I think that one of the things that we realize is that once the money comes out, it's usually gone. It's hard and I would be very careful unless, really, that was the only money you had available to you. 

That kinda goes back to those conversations you must have had with people in the past. Better to take on debt, do less into your retirement fund - now we're talking about not just putting less into but taking some out of that piggybank.

Right and it's clear that for many people, maybe you're going to have to pull back on the amount of money you put into that retirement account. I fielded a few questions myself on my podcast, and a lot of people were asking me, "I've had hours reduced" or "my partner has seen a reduction in hours, what should I do, I'm a little nervous." So at the very least yeah, you could pull back a little bit on your contribution level. But if you are not at all impacted by this financially, please do not take this moment to try to become the master timer of the stock and bond markets. Because you don't know anything. You know you don't know anything, nobody knows anything. So just keep to your system. Again, if you're not impacted, stop messing around with your portfolio.

My bank gave me a payment assistance plan but I haven’t gotten a clear answer on whether interest is still accumulating that I’ll have to pay on top of the deferred payments. 

I interpret this one as a forbearance of some kind, assuming a mortgage or maybe personal loan.

So here's the thing that is weird about getting forbearance. Forbearance is institution by institution. So that means that you've got to ask exactly how that money must be repaid. For example, you could have two people living in the Bay Area, both get forbearance on their mortgages. One has three months tacked on to the end of their term. The other has the three months balloon into a payment at the end of 90 days. You must ask, and you know what, I know everyone hates asking these questions because you kinda don't want to know the answer. But you've got to know the answer to prepare for it.

For those who delay paying their mortgage, what can they expect to happen with their credit scores?

Now this is interesting, I interviewed Kathy Kraninger who's the head of the Consumer Financial Protection Bureau on my podcast and she said there should be absolutely no negative impact on your credit report for any of these actions that you take if you are impacted by the virus. So I believe that is the case, that doesn't mean you shouldn't double, triple and quadruple check that there's something wacky on your credit report. That could mean that maybe in a month or so, just pull your annual credit report, make sure that there's no errors on there.

You're in New York City, we're here in the Bay Area; these are high value markets for real estate. This one wants to know: are jumbo mortgages going to be covered under forbearance programs?

Absolutely. 100% they are. No doubt. But again, here's the thing: you gotta ask for it. And so be clear that most of these things that you're asking for require you to make an outbound contact, which is a pain in the neck, I know that. But you must ask, and if you were negatively impacted then do ask for it.

By the way, for all you guys and gals out there who are trying to screw the system and you're not really impacted but you think you just want a little leeway: don't do that.

Yeah count yourself lucky if you don't need the help right now. Don't grab help that was meant for others.

Exactly.

Jill, this one may be state by state but in general: how long do I have to file for unemployment benefits? I've tried several times, I can't get past step four.

A lot of people are finding the process itself is challenging. You can't get through on the phone, the website may be confusing. Sometimes we've heard people get to a Yes/No question and whichever answer they give puts them into a loop that they can't get out of. So in general, is there some sunset that says, "sorry, too late. You didn't file in time?"

No, not right now. It's funny, I just got the exact same question. My sister's been trying to apply for unemployment in New York for the past six weeks. She's had to call to complete the process. Every time she calls, she gets hung up on. That's in New York, "hello and goodbye." 

So we've heard horrible stories about this. Just know, they're under-resourced, they've got terrible systems and you have got to be persistent. There should not be any sort of magic drop dead date that you won't get these benefits.

This next one - you read these and you realize the depth of the pain that's out there - I'm a stage four cancer patient, work two jobs and now laid off of one of them. What financial help is there to help pay for my treatment, medicine, etc? Insurance covers most but my portion is something I can no longer afford.

I think that this is a case where you've got to talk to the providers directly. And somehow or other it's sort of easier to call a nameless, faceless bank and ask for forbearance. But you've got to talk to your medical providers and you've gotta say exactly what's going on. I wouldn't even go to the insurance company, I would go to the doctors and oncologists that you're working with. I would explain to them what's going on and let them help you. If you just go into a system and you call an insurance company, you may or may not get help, I don't know. But I would tell you that it's much better to deal with the individual that you know to try to get that help.

What prospects are there for relief for the tens of thousands of families that are storing household belongings in storage facilities, sometimes at rates of hundreds of dollars a month, who will lose those belongings if they can't continue to pay because of the pandemic?

That's a question that maybe leads into a broader discussion of prioritizing what you're paying.

Yeah that's wild, I actually haven't heard that one. Now you just played a little stump the DJ on me. I don't know what happens to those. Again, I think you always have to be in touch with these people and tell them what's going on. I don't know, I mean there's probably some kind of forbearance that you could get, but I don't know if a storage facility would be instructed by say, the FDIC. So the banks are all being instructed by the government, FDIC, the Fed and the Treasury to provide forbearance; I don't know if a storage company would be included in that. I'd like to think so but I haven't heard that yet.

It does fall under a crack. It's not a mortgage, it's not a rent payment - we know those are being protected. It's definitely an obligation and I know they have the right to recover the goods if the money isn't paid. I'll make it a note to myself - we're going to follow up on this one locally.

Stan, do a story on that.

I'm on it. Nic Palmer our producer is looking at me right now saying, "man, why me?" (laughs) He's on it. 

So Jill that leads to a broader question. If you had to sit down and prioritize, "I've only got this much money right now in the bank account or in cash," where do I put it first?

I'm going to just plug the Consumer Financial Protection Bureau, brainchild of Elizabeth Warren. They have this really cool tool on their site, consumerfinance.gov, and if you just google "CFPB bill priority tool" it will drill down and help you figure this out. 

Obviously number one: food, that's an easy one right? And from there, everything else is negotiable. If you need your car because you're driving to work, then you're going to have to make your car payment and you're going to have to pay your insurance. If you're not going to work and you don't need your car right now, you're going to call up the loan company and say, "I'm at home and I don't need my car." Same thing with rent and mortgage and pretty much every bill except health insurance, which is another one that we really want people to pay attention to. So food and health insurance, everything else: negotiable.

I see a lot of deals on car loans, like zero interest rate. Is this a good time to buy a car? Should I be thinking about this?

If you need a car, I guess. Don't buy it for no reason. But I think this is going to be a great year to buy a car, for sure. 

I'm going to tell you my trick. I'm the worst about cars because I hate cars and I really don't like buying cars. But the absolute best time to buy a car is on December 30th or December 31st, if you can hold out 'til then. Because there's a bunch of cars on a lot and car dealers get paid bonuses based on their month-end, quarter-end and annuals. So what you can do is, you can actually find the very best deal for a car in the last two days of the year pretty much always. Now if you can't wait that long, wait 'til the very end of the month, do your research and if you can get a 0% loan that's great. 

And don't buy too much car, because that's a big mistake that people make. You know they're driving these big huge cars and believe me that gas prices are going to go up again. They're not going to stay down at these levels forever. So be smart about it. Don't buy a car just because you want something nice and new and clean, buy a car because you need one.

Applied for PUA - this is this new special category of unemployment - got a letter saying claim was approved. My online account says benefits have been deposited. How long until I get my debit card?

Now I don't know if every state does it this way, I know California uses Bank of America to issue a debit card with the benefits loaded on it.

Which is fabulous. Again, California leading in cuisine, leadership in pandemic control and now in PUA. It is what it is, there's no way to make the process go faster. So all I can say is, bring your patience with you as you claim these benefits and wait for this money.

I'm a 68-year-old senior with three part-time jobs. One of them closed totally, McDonald's stayed open for drive-through and JoAnn Fabric refused to close at first, later ordered to do online orders. In both places I submitted a letter at their request that I wanted time off due to the coronavirus. Do I qualify for unemployment benefits?

Yeah, you do. And you should file immediately. Pretty much, if you've had hours cut, even if you've been told early on, maybe a month ago you were told, "well we may or may not bring you back," if you haven't had a lot of communication, it doesn't matter: file. Just file. And the worst that happens is you don't get benefits. But you should be entitled.

I have a company with 12 employees. We had to almost shut down. I applied through a larger bank for the PPE loan the first day it was available. Haven't heard other than it was being worked on, so I got nervous and applied on Monday to a community bank in North Carolina - I assume this is coming from somebody in our listening audience here in the Bay Area - and had the money deposited in my account this morning. Why such a disconnect with the bigger banks?

This is such a great question. I just ran into the guy who owns my little coffee shop and same thing; he's in New York and he had a teeny tiny bank in Idaho get him his loan. 

It's because the larger banks were pretty unprepared for how quickly the onslaught of the PPP applications were. And they essentially were not clear from the government about what they should do to try to vet the people. There was a certain amount of compliance- you have to know your customer, you want to basically not give money out without sort of understanding who's applying. So the best way to protect yourself as an institution - a big one - is you say, "I have all this lending information like, Stan's a builder who has a zillion properties and lines of credit, I know him, I'm going to get his loan quickly. Jill I don't know, she's got some silly production company and does voice work. She's gonna go to the bottom of the list." And that's pretty much what happened. So the smaller banks were much more willing to say, "hey, come to us. We'll get you vetted fast, we'll figure it out" and they've done a great job. The second round of PPP: much better than the first round because these small banks have been managing the process better.

Part time employees in my school district are not being furloughed now, so they can't collect unemployment, but being told that after the pandemic they'll be let go permanently. This will greatly affect my family. How should I plan?

Oh brother, that's a stinky situation isn't it? Well I guess you're still getting paid right now, right? So you haven't been furloughed or laid off yet. What I would do is, if I feared that I could be next, I am stockpiling cash. Meaning that's that the same situation where I said you might not want to be contributing so much to your retirement account. You drop down your retirement contributions to whatever the match is. You start prioritizing your bills. You look very closely at which lenders or which of your vendors are you going to ask for forbearance from, and you get your ducks in a row.

Most importantly, you really need to get a much clearer understanding of your personal financial situation at a time where you still have a little bit of leeway.

Jill let's close with a good news story: I called the EDD support line, got a call back the same day from the California Employment Development Department. They asked a few questions, filed the claim for me - both unemployment and PUA - she told me how much (not enough) and when to expect it (not soon enough). California UI works, keep at it.

Hey, that's great news. And I know that you're taking questions all the time and if anyone out there is listening I've moved to a daily podcast and if you want to send me a question directly it's askjill@jillonmoney.com.