Michelle Singletary: Managing Finances During COVID-19 Transcript

Michelle Singeltary Beyond Speaking Podcast Transcript

Intro: Welcome to Beyond Speaking with Brian Lord. A podcast featuring deeper conversations with the world's top speakers.

 

Brian Lord: Hi, I'm Brian Lord, your host of the Beyond Speaking podcast and today we have on Michelle Singletary. Michelle is a nationally syndicated personal finance columnist for The Washington Post. Her award-winning column, The Color of Money is carried in dozens of papers across the country. Personally, we are big fans of her at Premiere. We have our own event series for our employees called Premiere University and we invited Michelle to come in and talk to our own employees. So she's somebody that we trust a lot and we've been big fans for years. So, Michelle, thank you so much for coming on.

 

Michelle Singletary: It's my pleasure to be here. I wish I could be there in person! 

 

Brian Lord: I know, I know! You're a lot of fun to have in person, which a lot of times people sometimes will say, "Well, I don't know if a personal finance person can be that fun." But, Michelle Singletary, definitely is that. So thanks for coming on. So the two big things that we want to talk about- So right now we're recording this in April of 2020 and the coronavirus and its effects on everyone are on the top of everyone's mind. So we'd like to focus on two main topics. So for Part 1, what do companies need to do to help employees manage their finances during the coronavirus crisis and what can they do to help or prepare their employees who may be laid off or furloughed? And then, 2, from the personal side, what do employees need to do with their personal finances during this time? So let's start off with the first part. What do companies need to do to help employees manage their finances during this crisis?

 

Michelle Singletary: You know, the biggest thing that employees can do right now is to communicate with their employee base. What are you going through? Because even if they still have their job and they're still doing their job, there are all kinds of pressure from the people around them. Maybe their spouse was laid off. Maybe their adult children are having issues. And I know for myself, my two college students are here in the house. And so we know that studies show if that employees have issues with performance, a lot of times it's because of the financial issues that are impacting their life. So even if they've got a job, they've got all this other pressure and maybe they're sending money to other people. And so I would encourage constant communication, maybe even a daily or, you know, twice a week e-mail or announcement, like how are things going? Is there anything that I can do, continue to point them to any employee portal that you have for help? EAP program, anything, counselors available anything you can do to help relieve the stress and pressure which is going to help your bottom line. If you're still working and you've got people still working, believe me, they are very stressed and that stress relates to their productivity which relates to your bottom line and to their bottom line as well. I mean, people might be eating out more and spending money even though we're inside. So that's the one thing. Communicate with them. And then secondly, let them know about all the resources available to them through the various stimulus package. For example, recently passed was the CARES Act and that allowed people to tap their 401K money if they have a financial need. Then again, you might think, well, they are still working, but maybe their spouses aren't, or they're sending money to other people in their families so they might need to pull money out. CARES Act allows them to now pull it out if they're 59 and a half and younger without that 10 percent penalty. And so that's something that you should know. So you could be sending out information to them about what's available. The CARES Act also allows people to borrow more from their retirement plan if the company allows loans. So typically there's a loan limit of about 50 thousand dollars. So now they've pushed that up to a hundred thousand. So clearly we don't want people pulling that money out, but if the circumstances stand that they have to, that's there so they can pull out that loan. And also the loan payments aren't due right away they get a year's break. And if they already have a loan, they can pause that loan up to a year. These are all things that will help alleviate their stress. Again, even if they're not feeling it in terms of working.

 

Brian Lord: And is that for anybody or just people that have gotten the actual virus or is it just anybody affected in the economy?

 

Michelle Singletary: That's a really good question. Yes, it has to be coronavirus-related. So if they have it, their spouse has it. And also, maybe their children are at home because they can't go to school. They would be able to tap these resources. Maybe a relative. Anything related to them and the virus, they can tap these funds. And the employee gets to decide. So employers clearly would know more about people's lives, particularly if a spouse has died or got sick or maybe they're being quarantined, maybe the business is still open for people to come in, but people have to self-quarantine. So anything related to the COVID-19, it would allow them to tap these new resources, the suspension of the 10 percent penalty if you're 59 and a half or younger. And also the increase in the 401K loans and there are all kinds of provisions with that as well. For example, with the withdrawal from the plan, they have up to three years to pay it back and three years to pay the taxes on it so people can- And the good thing about that is and the reason why employers want to emphasize is that they are probably thinking, "Well, I don't want to tell people how to take money out," but if you tell them, "Hey, listen, you can still contribute to your plan and not worry that you have to take that money and use it later." So this way you could say, "Hey, keep putting in there, because there's this law that says you can take it out without that penalty." So that works both ways, right? Employees don't have all these people taking money out of there- I shouldn't say that. Employees don't have all these- Let me rephrase that. Employers don't have all these people stopping their contributions because they want to stockpile money. So now they can still contribute to their plan with the knowledge that they can take that money out later if they need it. And that's a really good benefit for employers. So you can encourage them to do that.

 

Brian Lord: And so are employers still putting money in or matching funds right now or I guess that's something they need to discuss with employees?

 

Michelle Singletary: Well, it's interesting that you say that. I wrote a column recently that more- not a lot right now- but more employers are suspending or reducing their matching contributions. Clearly, a lot that are impacted directly to entertainment, travel, restaurants, but surprisingly not as many as you would think. Still, many employers are doing a match in contribution. Now, if you think that you're going to be doing this, the sooner you tell people, the better. You know, if you know for sure you're gonna do it, that you're gonna have to suspend it, and then I would recommend if you are going to suspend it, try to do it so that you say, "You know, we're going to suspend it until this date and let's see what happens" So that people have encouragement that the match will, you know, get back on track once this whole crisis ends. And if you have to suspend or reduce your matching contributions- because everyone sort of understands what's going on- you know, also follow that advice that says, "Listen, I know this was bait for you to get you to contribute to your retirement plan, but don't stop just because the match is not there. The match was a bonus. You still need to save for your retirement." So again, remember at the beginning I talked about how you communicate with people if you just let them know what's going on and that you're not doing these things out of malice. People will go along with you better if they understand what's going on. And there's an end date to this.

 

Brian Lord: And so from that, too... So obviously we've got some companies that are continuing business, maybe not as usual, but closer than others and then some are communicating with employees that they may have to lay off or furlough, you know, having some of those difficult decisions or conversations. What advice would you have for those leaders or executives for those companies?

 

Michelle Singletary: Yeah. If companies find it, they are going to have to have layoffs and furloughs, that's a tough conversation and I don't know if there's anything that you can really say that will make people feel better about it. But just be honest. Share was she said that she can you know, obviously people don't want to lay folks off. And so the best thing that you can do is communicate and have resources readily available to point people towards, say, for example, counseling. So that's where your employee assistance program becomes key. And also, if people have health care, mental health services through their health care plan, it's hard to tell people to go seek counseling because we all have these issues around that. But this can be a very stressful time. And you want to be able to show that you have the resources there for people right there. So if there's an announcement, say "Here's where you go" and I'm sure the companies already know how to do this. But you also want to have community resources. Where can they go to you know, you hate to say this, but food banks and social services and all kinds of, you know, just have the list and stuff ready for them, especially if you have a lot of people who are lower-income. Their salaries would already be tough to make a living with what they had. Communication is just so key and compassionate communication- don't just send in a memo, you know, have them talk to your managers, you know, have them have conversations with people one-on-one. It's much easier on the employee. Maybe not the person giving the information to say "We've got got to shut down. So, so sorry. Here are some things that I can help you with, some resources, both from the companies, what have you and the community point of view."

 

Brian Lord: Now, from the second big side of this is employees or providers or whoever might be from their selves for their families. What advice would you give for them from a personal finance perspective?

 

Michelle Singletary: Yes, so if your employees are faced with the layoff of furlough. This is what I've been telling people, this is what I've been writing- That you have to treat your bills just like an emergency room staff would do so when an emergency room is full of patients, they triage them so they take care of the sicker ones, really a more critical condition. And that's what they have to do with their bills. So this is the kind of information that you can provide them, certainly. You know, I talk to people about this all the time. So, you know, rent, mortgage, child support, utilities, those come first and debts come, you know, get back in line. Like if someone had a, you know, a twisted ankle, you know, they're gonna go behind somebody who is having a heart attack. And while we would never encourage people not to pay your debts, this is an extraordinary time and that means extraordinary measures had to be taken. So they may have to put their debt payments on pause. Now, to do that, they need to communicate with their lenders, you know, their mortgage company, their landlord- not their landlords. But, you know, credit card companies let them know what's going on and encourage them to do that. Many lenders have set up separate lines to help people, they've sent down emails, but communicate to them. Take care of the necessities first and if something can go, let it go until you can get yourself in another position where you can pay your expenses. Encourage them to apply for unemployment insurance. And I have to tell you, the line is long. People are waiting for hours and days before they can get through. You want to let them know that- Don't just say "Apply for unemployment" without some sort of indication of "This is going to be hard to apply for." Whatever state you're in, you want to let them know what's the maximum they can get and the procedure. You want- Again, the more information you give people, the better because when this happens, it's like people just go into shutdown mode. And the more they have in front of them, they don't have to search a number they don't know, they don't have to go on the Internet for hours and try to figure out how to do something the better it is because hopefully, these jobs will come back. And you want people to come back knowing that when they left, you were as compassionate as possible. And you also gave them enough information to help them weather this storm.

 

Brian Lord: Mhmm. And what... You know from that perspective- How if people are still in having a job, how should they approach it? I know there's you know, how much do you spend, how much do you not? What should you spend money on? What should you save? What advice would you give people from that perspective that still do have a job?

 

Michelle Singletary: Right. I have one phrase for you right now and this implies to everybody. Cash is king! So if you still are working and you're paying your people, encourage them to save, save, save. You know that this- Because we don't know what's happening. Those that are doing okay and still let you work from home - Like you and I can work from home. We don't know what's going to happen in six months. And it might be that it changes, it up-ends it. So right now, if you've never had that emergency fund, now is the time to have it because you have hopefully reduced expenses. If you're working from home, you're not commuting, you're not paying for parking, you're not eating lunch out. So this is a time to build that emergency fund, that three to six months emergency fund. I encourage you to have some kind of Life Happens Fund for when things in life happen. So you might not be driving around as much, but your kids are home breaking up stuff, you know? [Laughing] You know, like in my house, they had the lights on all the time. It's like "Cut my lights out!" [Laughing] I'm right behind them, cutting lights but, you know, my electricity bill's going to be through the roof during this time period! You know, more kids are there on the Internet and all those expenses and you might be renting more movies and even though restaurants are closed, many are doing takeouts. You might just be so stressed that you're ordering out actually even more than when we weren't in this crisis. Because I know we are in our house, because I'm just- When I finish work, you know, I'm exhausted, a little depressed. And I'm just like, "I'm just gonna go ahead and order that burger." But you want to pause on that, you want to make sure. So triage your bills, pay what's necessary, build up those emergency funds now that you don't have all those expenses because your kids aren't out there doing sports activities and all the things that you pay for, let that money roll into a bank account and put it to the side because you just don't know what's going to happen in the end. Well, we pray and hope that people won't lose their jobs so you plan for the best and you know, what is it... You hope for the best and plan for the worst. And so that's what you want to do right now. And then, you know, also, this is a little past the whole, you know, work and employee. But just if you've got extra, help other people. You know, maybe, you know some coworkers and maybe their spouse is laid off and maybe you can help them even buy groceries or send groceries over to them. We are all in this together and I think companies should encourage their employees to be as generous as they can afford to be because that will be the key. If I'm an employer, I want people to be as stress-free as possible and anything that I can do to help them means more for me and my company if we just want to look at the bottom line. Happy employees, less-stressed employees, it directly impacts your bottom line.

 

Brian Lord: And what about saving for other things like college? I know you mentioned retirement a little bit, but it's like... I've got four kids. And so that's one of the things that we always try to do. What advice would you give for people for some of those things beyond an emergency fund right now?

 

Michelle Singletary: If you're still working and you still have your regular income and it doesn't look like there's going to be any layoffs or furlough, then continue funding those things, continue funding your retirement plan. In fact, if a match is taken away, put more into makeup for that match. If you're saving for your kid's college fund, continue to do that. And like I said, with any of the savings that you have, because we're not moving around and doing all the things that we normally do, many people like to cancel their vacation, take that money and put it into their college fund. I'm a big believer in a 529 Plan. I had one for each of my children and they have all gone to college or are going to college currently with no debt. They don't have debt and we don't have debt for them because we practice this. So, you know, the one thing about when crisis and a storm happens, it makes us really assess what's important. Right, because everything is shut down and now you know that you need to do certain things. And so I would continue funding all those. If, however, there is some indication that there may be a disruption in your income then I would pull back on some of that. I would pull back on retirement savings, I would pull back on putting money in the college fund because you want to triage, you want to save that money for the things that you need. A roof over your head, food on your table, your lights on. That's a priority right now and I know it goes against everything we've told people, but when you are in a storm, you know, you've got to do what you need to do. You've got to put the sandbags up against the window. You put your umbrellas up and secure yourself. Once this is all over, we can talk about how to get back on track. That's what I do for a living when I come out to speak to people, I can help them get back on track. So right now, I need you to take care of the most important things right now. It's your financial security and those things that we talked about. Down the road, we can get back on track. It's never an end. And, you know, even if you're closer to retirement, we can still help you get back on track. Now, you might have to make some different decisions, like maybe that Florida home, you're going to move away to or travel across the world? [Laughing] You might not be able to do that. You might have to, you know, shared housing somewhere down the road. So there is a way to get back on track and I think a lot of people are worried about that if they tap their retirement and they have to stop funding their kids' college, what is going to happen? And then that adds to the stress of what's already going on. Hey, listen, your kids can still get a college education. They can go to community college for two years and then transfer to a four-year university. They can transfer to a four-year university and live at home. I know right now people like "I want them out!" But the storm came, our roof got blown off, and when the storm ends, we had to put that roof back on and do some things a little differently if we didn't have the resources. And that's okay. Life brings us all kinds of things and we need to be able to pivot when things like that happen. And the more employees can do to help that, the better.

 

Brian Lord: What bright spots do you see? I know you're an optimistic person by nature, at least. At least I think so. [Laughing] So what bright spots do you see to give some people some encouragement?

 

Michelle Singletary: You know, it's so interesting you asked that. A reader sent me an email and, you know, I preach about financial security. I preach about being frugal. I talk about, you know, you need to save, save, save and get rid of your debt. And now all this has happened and some people are in this situation that they're in because they didn't follow any of that advice-

 

Brian Lord: -Now listen to Michelle! 

 

Michelle Singletary: Yeah, right? And, now this is not the time to berate people. It's not the time to wag your finger and "I told you so." There is a time when I could do that when we're well past this and I can fuss. What I see, the hope I see is that I believe people are now starting to realize what's important. Because we've been running around doing a whole bunch of stuff, spending a whole bunch of money. And now that we have to stay home and be without kids, you realize you don't have to have them involved in a hundred million things costing you all this money. You don't have to necessarily send them away if you don't have the money for them to go out-of-state. We are realizing now how important it is to have that emergency fund. And I think that this crisis has allowed us to pause because we have to stay in place. It has allowed individuals to think about what's most important. Because I've always told people, spend your money on the things that really matter to you, saving for college, your retirement. You know, we have been vacationing in our homes and we're getting through it. So you don't have to take a vacation that you can't afford. I think from an employer's point of view, I think they're realizing the things that they should've had in place and need to have in place a contingency plan. Maybe they didn't save as much as they should have. Maybe they didn't put as much- and we're talking small business and large. Maybe their reserves needed to be better so that they can take care of their employees if there's a disruption in their business. Right? Those businesses need to have an emergency fund to pay their people so that they can keep them working. Because listen, they know better than I how much it costs to replace people. Right? And so people have been laid off and furloughed and go find another job. Now you've got to replace those people and you have a brain drain. Right? So I think the optimistic sunshine is that even though right now we're in the clouds and it's stormy and it feels like that patter on that window, that rain is never gonna stop, we know that it will. And we just have to use this time to think about what's the most important. My employees have to come first! You've got to think about them first. They are who you are! And individuals, you got to do the things that we've been preaching about and teaching you. Because my grandmother used to say- I was raised by my grandmother and she didn't make much money, but she was a great saver. And she used to say, "You need a rainy day fund because it's always gonna rain." Right now, we're in the middle of a monsoon. And so you've got to prepare that. And I think that to me, part of me thinks that maybe, just maybe, we have learned this lesson about what's important and it had to take a catastrophic thing for us to understand that the people we love matter more than the stuff. Right? The people we love, our jobs matter more than vacations and spending money we don't have and then we have all this debt and we're at work and we can't work because we have all this debt and if you're not working the rate you're supposed to, then you're really robbing your employer because when you're at work, you're supposed to be doing their work. They're paying you for that and I think all of this happening has made us realize we have to be better workers. We have to be better savers. We have to be better employers. We have to think about what happens when something like this happens. How do we make sure people still have health care? So when you're negotiating health care services for your employees think about that. What's the best option? The less costly options? So if they have to go on COBRA, their COBRA payments aren't as much because, you know, you have to think about that! Right? Some people are furloughed or laid off. They they maybe not get into the health care [Inaudible]. They have to use COBRA. Well, make sure that you negotiate the best plan for them so that if that happens, they don't have to pay so much. Negotiate the best retirement plan. Make sure the costs are low enough so that if you have to suspend the match, people still can earn a lot on their retirement account because the fees are last, right? Oh, it all weaves together. So I have a really good retirement plan with really nice low fees. If I had to suspend my match, people are going to still earn money in my plan because I've made sure that the fees are reasonable. See how this all works together? So that's what I'm taking from this because you have to, otherwise you'd be depressed every day. [Laughing] I just think that we have all realized and, you know, again, I have to say this. I've been very warmed by the e-mails and notices I have been getting from a lot of companies. And I think some of them have done a really good job communicating with both the employees and customers. Like out where I work, they've been sending out regular updates about what's going on and this is where you can go get some help and, you know, just anything in the community. They've been letting be made aware of and I've appreciated those notes.

 

Brian Lord: Mmhmm. Well, that's great. Well, from us, too, I know we appreciate it. I think it was, you know, two or three years ago when you spoke and I know a lot of people have asked me different things. "Oh, and so she said to do this, right?" Or, you know, and of course, we had that, you know, making that imprint two or three years ago is the perfect time to have that and so, you know, that's why I wanted to make sure that we ask you to share with people just because that's... You have such valuable information that helps people really change their lives for the better. So, Michelle, thank you so much for coming on and being a part of this.

 

Michelle Singletary: Yeah. I'm glad you're doing this and I hope that, you know, either during this process or afterward, companies value having good financial information presented to their folks from someone who does that's not selling them anything other than providing really good information. I, you know, you need unbiased sources to help people. And I think speak to their level as well about what they need to do. I do a little fussing, a lot of joking, but the fact of the matter is we need to prepare ourselves and we're in the crisis now you still need to do some crisis management and when this is over, people are going to be in a lot of financial trouble and you've got a need to have something them through.


 

To learn more about Michelle Singletary visit https://premierespeakers.com/michelle_singletary

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