What Not To Do With Your Money If You’re Broke AF Right Now

By Sheena Foster | January 18, 2021
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One year ago, perennial personal finance expert Suze Orman was doling out her tough-love financial advice, including haggling with creditors for lower interest rates and delayed payments. 

But now? She’s changing her tune.

“We’re out of options. You can’t call your creditors. They’re done … So you have to generate less expenses and somehow find more money. That’s the goal here,” says Orman.

Um?

Finding more money is a tall order, to say the least. Amid the runaway pandemic, the government has gone bust with a record-breaking $572 billion debt and an economy in free fall with nearly 11 million and counting unemployed. 

It’s grim and apocalyptic AF. The Pantone 2021 color is a red called That Bitch 2020 Isn’t Over Yet (just kidding, but it literally is gray). And on kitchen tables across America, the bills are piling up — that is, for those lucky enough to still have a kitchen table. 

“The eviction moratorium is over,” Orman says. “Very shortly, unless it’s extended, the student loan payment moratorium is over, the mortgage payment moratorium is over, and now you have got to pay your car payments and your car insurance and your life insurance. All of those moratoriums where you had months where you did not have to pay any of those bills, now you do.”

It’s seriously daunting. So, what’s a broke-ass betch to do?

“You have to live below your means but within your needs,” Orman advises. “If you are finding yourself in a situation where you have no money coming in, you’re living off unemployment, and you can’t wait until the stimulus check gets there, then you’re going to have to make some very, very hard decisions in your life.”

No kidding…

Don’t Use Your Stimulus Check For Back Rent

Orman says fans have been sending her pictures of their empty fridges. 

“If you are waiting for that stimulus check and you don’t have another penny to your name, I would go and buy canned food with it. I’m not joking. At least if you bought canned chicken, canned salmon, you can feed yourself and your kids. At least project two months’ worth of food for yourself and your family and take care of that and take that one concern off the table.” 

If you do owe back rent, Orman says do not use your stimulus to pay it.  With no end to the pandemic in sight, you’ll need as much cash reserves as possible. If you can, she suggests moving back in with Mom or Dad, a sibling or a friend until you can get back on your feet. 

“If you do not have a job, and you don’t know what you’re going to do, sorry everybody, you have to move out.” 

If you’re fortunate enough to be on the other end of the financial spectrum, and your finances are in order, Orman says, be selfless. “If you have a paycheck coming in, you’re relatively secure, you have an apartment, you have food, and you have your next-door neighbor or a friend or a relative, and they’re about to be evicted, they can’t keep their electricity on because it’s been shut off in the middle of winter — help them.” That might be a tall order coming from a country of people who won’t even put a piece of cloth over their face to save lives, but hey, we can dream.

Don’t Take A 401K Loan

Thinking about tapping your 401K for a hardship loan in 2021? Orman says, “Never.” The CARES Act that allowed Americans to withdraw up to $100,000 penalty-free and take up to three years to repay the income tax has expired, so you’ll have to pay your withdrawal back pronto. Plus, in case sh*t really hits the fan, your 401k is protected from bankruptcy.

“If it’s between taking money out of your 401k to get you by, and all you have is enough for one month at most, and you don’t have any prospects on the horizon, I would much rather see you claim bankruptcy now for your credit card debt, and all your debts — except student loan debt, obviously — and be able to keep your 401k money intact and not have any debt. Which is why you want a Roth IRA, because if you had a Roth IRA now and you needed money, you could withdraw it penalty and tax-free.”

Don’t Forget About Saving

Pre-pandemic, Orman said an 8- to 12-month emergency savings is crucial. Today, she says a three-year stash is necessary. It’s a lofty goal for those living hand-to-mouth, but starting somewhere, with any leftover money, is still a start. Orman says she’s partnered with Alliant Credit Union to incentivize people to save $100 in a high yield savings account every month. At the end of 12 months, the credit union will reward brand-new account holders who have a $1,200 balance with a $100 bonus.

Don’t Bank On Student Loan Forgiveness

It remains to be seen if President Biden will succeed in his plan to cancel $10,000 of student loan debt for every borrower. “You have to get that this is not a done deal,” she says. “You should continue to do exactly what you can do and act as if is not going to happen. If you’re out of work, just pay as you go, or do an income-based repayment program. Just don’t go into default.” 

There’s also an IRS loophole to be aware of. “Don’t be afraid that the amount accruing gets added to the back end of the loan. If nothing changes in 20, 25 years, if you owe more on the student loan than what you’re technically worth, you’re insolvent, and the IRS will most likely forgive it.” Adds Orman, “If you’re making money, you want to be on the standard repayment method.”

Do Consider A Career Change

These tough times are as much about survival in the present as they are about making smart pivots to safeguard yourself financially in the future. Orman says that the pandemic wiping away jobs shouldn’t be your only worry. In case we didn’t have enough to be anxious over, there’s also the threat of artificial intelligence replacing human workers, further destabilizing the gig economy. 

“You have to take this time to reimagine yourself, to recreate yourself. And what can you do? Who can you become, where you cannot be replaced by artificial intelligence or a robot? What can you do to create yourself so that you never find yourself in this position again? Because you’re going to have to make the decision. Do you do a temporary fix and just get anything that brings in money? Maybe. But at the same time, what can you do to make this be a permanent fix so that this couldn’t happen to you? Not because of the pandemic, but because of the onslaught of the technological revolution that will absolutely do away with jobs in the future.”

When in doubt, Orman says saving is the name of the game. So, chill with the online shopping. (No, you don’t need the new SKIMS collection.) Paying your bills on time will keep your credit report happy. And stash your cash, in a high yield savings account, preferably. Bottom line, even if you haven’t worn pants in months, you’d better tighten your belt.

Images: Annie Spratt / Unsplash

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