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Pandemic shines light on how skimpy many emergency funds are

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An emergency can be practically anything.

Conventional examples usually include an unexpected car expense or pet bill — not a global pandemic and months of job loss.

"The pandemic exposed the widening gap between the financially secure and insecure," said Dawn Goldbacher, vice president of business development at Prudential.

The CARES Act has delivered stimulus checks and other forms of federal financial assistance to struggling households. Now there's bipartisan support for a second round of $1,200 stimulus checks but Republicans and Democrats are still wrangling over the details.

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While Americans wait for that next check, they're running through savings in their emergency funds.

More than half of people said they're earning much less than before the pandemic started, according to a survey from FlexJobs and Prudential. The two firms asked more than 1,100 U.S.-based respondents in June about their household finances and financial security.

Respondents were asked to compare their financial stability with their pre-Covid-19 lives. Almost half (44%) said they are struggling now, compared with 24% who were having a tough time before the crisis began.

Finding cash

More than six months into the pandemic, many people have likely already altered and cut their spending as much as possible. The end of the $600 federal unemployment supplement has also squeezed household finances. 

You may have to turn to other strategies to meet your expenses. 

Consider a side hustle that's consistent with social distancing guidelines, such as teaching English to kids in other countries. Delivery services have been exploding, so check out Instacart, PostmatesDoorDashUber Eats or Grubhub.

Revisit your closet. You may be able to raise cash from clothing you no longer wear. Don't forget other household items, including books, furniture, kitchenware and even electronics.

The first platform most people think of is eBay, the granddaddy of online selling, but it's got plenty of competition now. Check out Poshmark for clothes and household items, or BackMarket for phones, tablets and computers.

You can also make money renting something, like your car.

Don't invest now

Keep any available cash at the ready, says Peter Brunton, chief investment officer at Strategic Wealth Partners.

Whenever that next stimulus check shows up, you want to save, not invest it. "It's not sexy to get 0.9% [interest] but considering how far the market has come back, I would not put cash you need back into the stock market," he said.

Brunton flouts conventional financial planning and says people could consider selling some stocks — "especially if you're overly exposed to the stock market, which most people are," he said. "That's a natural way of rebalancing [the account]."

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Someone with a combination of stocks and bonds could consider eliminating their bond position. "You're not getting compensated in the bond market right now," he said.

Those who are 100% in stocks would reduce their exposure to the market simply by selling off some holdings.

Minimize the eventual tax hit by selling whatever is most efficient. Let's say you have an exchange-traded fund and a mutual fund in your portfolio, both based on the S&P 500 index. "[If] the mutual fund has a much higher percentage of gains," Brunton says, "I would sell the ETF to avoid a bigger tax hit."

Brunton also recommends formal financial planning: It's not too late to create a plan and seek professional guidance.

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