Money Expert Tonya Rapley on How to Survive and Thrive in an Economic Crisis

We spoke with millennial money expert Tonya Rapley, who is known for her award-winning site My Fab Finance. She gave us some insight into the market, student loans, retirement, savings and investments, and much more. It doesn’t stop there! As a wife and mother to a 16-month-old, she has a lot on her plate. But Tonya is also launching a brand new series called Leveling Up in Uncertainty, which will provide educational tools and serve as an information source to help us thrive and come out of this on the other side. 

Black Love: What areas of my finances can I take advantage of in a down market?

It may be a chance for you to start or invest in a business that is going to be essential during this time. For example, medical supply companies and cleaning companies are going to be critical in the coming months. If you have the relationships or the capabilities, that might be a good option.

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BL: What should we think about in terms of financial stability over the next month and six months from now?

TR: You should be thinking about savings and prioritization. Given that things are uncertain for your stability, it’s important to keep more than you think you need accessible. Emphasis on think, calculate how much your necessities cost each month, and then pad that amount and multiply it by four. By accessible I mean that it’s not tied up in investments, you can access it relatively quickly if you need it. 

And then, prioritization. It might come down to you deciding which bills get paid first. Always make sure your shelter and nourishment are covered, followed by everything else. It might be time to cut back on the cable bill and other non-essential luxuries. 

BL: Should I have cash at home? If so, how much?

TR: The good thing is that even at the height of the 2008 crisis, people were still able to access their cash. The money in your bank account is insured up to $250,000. As of 2020, no one has ever lost any money because of a bank failure. So, you don’t need to have your entire emergency savings in a vault at home. 

But it is a good practice to have cash at home at all times. Absent of a recession, natural disasters happen as well. At a minimum, have $200, but the larger your family is, and the more your expenses are, the more you will need. A good baseline is $500-$1000. You’ll want to make sure you have enough for things such as gas for your vehicle, groceries, and medication. Also, make sure it’s in smaller bills, $5, $10, $20s because stores might not have the ability to provide change for large bills.

TR: Yes, you should always have a savings account. It allows you to separate your money by putting aside for the future and safe usage now. Separate your money until you don’t have to or you need your savings. But I look at the money in my savings as a last resort.

Just keep in mind that the Fed recently slashed rates, which means that banks will be paying even less interest in savings accounts, but recession or no recession, it’s unlikely you would get rich from money in your savings account anyway. It seems we are going into a recession. So what lessons learned can we take from the 2008 financial crisis that can help us in these current times? 

DEBT & CREDIT

TR: You should be aware of all of the changing guidelines. As of March 17, interests are being waived, but you are still responsible for making your payments. However, things are changing daily. If your financial situation changes or you sense it could change, contact your service(s) immediately to find out what your options are. Now isn’t necessarily the time to amp up your aggressive student loan elimination, even if you have a “safe” job.

BL: My credit card company is offering 0% interest, 0 penalty fees, and no loss of point accumulation. What is the best way to take advantage of offers such as these to potentially get ahead? 

TR: Pay the minimum on this debt or a little more if you can afford to. You should keep this card in good standing so that you have access to inexpensive credit to float necessities should money get tight.

BL: What are some of the best ways to eliminate credit card debt outside of transferring balances to new cards with no interest rate before a specific time?

TR: Stop accumulating new debt on the card and pay as much on it as you possibly can. 

Related: How We Got Out of $100,000 of Debt (and You Can, Too)

BL: Are there mortgage or debt relief options available without penalty?

TR: This depends on decisions made by the state and federal government along with your lenders or mortgage servicers. We may see a few institutions roll out mortgage forbearance. But keep in mind that mortgage forbearance doesn’t mean mortgage forgiveness, so you still have to pay back what you owe. They might want it as a lump sum or by adding it to your regular monthly payment. You’ll want to read and reread the fine print to make sure there won’t be delayed penalties assessed if you aren’t able to pay a specific amount within a particular time.

SAVINGS & INVESTMENTS

BL: Should I buy the house I’ve been looking to purchase? Today? Wait a week? Wait months? Don’t even think about it?

TR: Probably not today for a few reasons because we still don’t know what the impacts of these events will be. If you are financially prepared to buy today, and you purchase today, but the market drops, you could see a significant loss in the value of your home.

It’s going to take a while for the prices of the housing market to reflect a recession. I would say this summer at the earliest. So continue to hold off, and if you’re in a financial position to buy when prices drop, then purchase. But also make sure your finances can afford homeownership because it isn’t solely about your down payment and closing costs. You’ll need to have enough saved to cover any financial emergencies that happen after you close or that you aren’t covered by under warranty or insurance.

BL: What are the benefits/consequences of refinancing my home now?

TR: It depends on your initial rate and if it would actually save you money. I’ve received this question quite a bit since the announcement that the Fed slashed the rate. Lower rates indeed mean you’d pay less in interest on the money you borrow; however, the rule of thumb is if the current rate is 0.5% lower than your current rate. Also, keep in mind that your credit score and LTV, which is your loan-to-value ratio (LTV), or how much you borrow versus the appraised value of your home affects the rate you receive. Because rates are low doesn’t mean your refinance rate will be lower.

TR: The truth about most passive income opportunities is that they require time or capital to set up, and most of the time, systems too. Anything that requires minimal start-up costs is pretty low risk. A few ideas include:

—Publish an e-book or a book that is sold and fulfilled on Amazon.
—Purchase an existing dropshipping site.
—Create and sell downloadable templates on sites such as Etsy.
—Start a YouTube channel filled with your knowledge.
—Create an online course. 

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BL: Is it a good idea to buy stocks since they are cheaper now, or would that be too risky?

TR: The stock market is risky in general because you are investing money based on what could happen. If you have financial reserves set aside, there is nothing wrong with investing. Still, a big mistake people make is attempt to time the market or underestimate how much stock they need to have to make a difference in their financial portfolio. Consistency in investing will earn you more than snatching a limited amount of stock up at a discounted price.

BL: How much money should I have in an emergency fund? 

TR: At minimum $1,000, but the goal amount is 3-6 months worth of your necessary monthly expenses. (*Editor’s note: Work to save 3 months worth of income if you’re in double income household and 6 months if you’re in a single income household. The more income streams you have, the less vulnerable you are if you lose one.) According to the Bureau of Labor and Statistics, the average duration of unemployment in August 2019 was 22 weeks; that is approximately four months. If you were to lose your job, it could take you four months to replace your income.  

If all of your expenses equal $3,200, your goal should be to have approximately $10,000- $20,000 in savings. This figure is standard. Although unrealistic for some, if you have dependents, it’s important to get as close to this as possible. When determining your number, take into consideration the money you might receive during your unemployment time, such as benefits, child support, or other income.

BL: What type of investments would you suggest that are financially considered low risk? 

TR: If you are looking for relatively safe investments, then consider CDs, treasury securities, savings bonds, fixed and indexed annuities, or insured municipal bonds. Keep in mind low risk generally means low return. With these options, your money will work for you, but it won’t necessarily grow exponentially. A good portfolio includes both high and low-risk investments.

BL: With the current market losses, what is your advice for people who have retirement savings tied up in stocks? 

BL: What changes should you make to your portfolio?

TR: The changes you should make in your portfolio depend on what your goals are and your time horizon (how long you have until you retire). If your retirement is still far off, you might be able to leave things as is. However, if you are nearing retirement, you might want to consider rebalancing your portfolio and moving your money into lower-risk investment options. It’s best to reach out to a financial advisor who can look at your actual portfolio and make suggestions based on your goals. 

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BL: When should I start saving for retirement (generally speaking and now that we are dealing with an economic crisis)? 

TR: You should start saving for retirement when you can afford it. Meaning you can pay your bills and put money aside in savings. During the crises would be an excellent time to start because, in some instances, you will be able to get more shares for your money, and as the market rebounds, your money will grow. 

That isn’t to say if we experience another period of uncertainty as we are now, that you should pull your money out. Keep going and investing by taking the good with the bad. Unless you are an expert or study, it becomes challenging to attempt to time the market, so it is in your best interest to get started and remain consistent.

BL: What other options are available if you don’t have a 401K?

TR: Outside of a 401k, you can invest in Traditional and Roth IRAS. If you are self-employed, you can open and contribute to a SEP IRA, and if you work in the non-profit sector, find out if you have access to a 403b. 

BL: How can I make my loans go away even after deferring for years?

TR: That depends on the type of loan. Of course, the easiest way is to pay them. If you aren’t in good standing with the services, they may be willing to settle your debt for less than the amount owed. You should also find out if you qualify for any loan forgiveness programs. If none of these options work, you should contact a skilled bankruptcy attorney who likely has seen it all and can advise you of the best steps to take to discharge your loan.

The week of March 30-April 3, Tonya is offering daily webinars on leveling up in uncertain times! Experts will discuss everything from investing in a downturn, understanding your 2020 taxes, and making wise real estate investments. To register for the series, visit myfabfinance.com/levelup.

Disclaimer: BlackLove.com does not offer any financial advice, and the views and opinions expressed in this article are the author’s viewpoints and opinions.