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How to make ends meet before Covid relief arrives

Volunteers from Forgotten Harvest food bank at a mobile pantry distribution before Christmas in Warren, Michigan, on Dec. 21, 2020.
Emily Elconin | Reuters

President Donald Trump signed the $900 billion coronavirus relief bill on Sunday, solidifying another round of aid to Americans.

Still, millions of families are staring down a gap in benefits that could stretch for weeks.

On Saturday, two key unemployment programs supporting 14 million Americans expired. Even though the latest bill will extend the programs, plus an additional $300 per week to the unemployed, officials don't know when the programs will restart, and experts have estimated it could take three to six weeks.

That leaves people with a lengthy period of no income and few options for relief 10 months into the pandemic. In addition, another round of $600 stimulus checks will go out later than originally anticipated.

"Like many people in America, I don't really understand the purpose of this delay," said Leigh Phillips, CEO of SaverLife, a nonprofit focused on financial security. "It was completely unnecessary and shows a complete lack of understanding of the desperation that millions of American families are facing right now."

Three ways the new stimulus checks are different from the CARES Act payments
How the new stimulus checks are different from the CARES Act

Negotiate or borrow

If you are likely going to see a gap in income, one thing you can do is be proactive and call anyone you may owe money and let them know your situation, said Lee Baker, a certified financial planner and owner of Apex Financial Services, based in Atlanta.

"What we've got going on is no mystery to anybody," he said, adding that many institutions have been flexible with people given the circumstances of the year.

Borrowing money from family or friends may also be an option. About 2 in 5 adults have helped family or friends during the Covid-19 outbreak, according to an October survey from the National Endowment for Financial Education. About 14% provided one-time monetary support and 13% are giving money on a regular basis.

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"I would encourage anybody that's going to do that to be careful, understand the family dynamic and perhaps take the step of formalizing it," said Baker. That could be as simple as putting the amount of the loan and your commitment to repaying it in writing, he said.

You could use a credit card for purchases or take a cash advance if you absolutely need the money, according to CFP Louis Barajas, CFP Louis Barajas, a partner at Newport Beach, California-based MGO Wealth Advisors.

"You're not using it to buy Christmas presents," said Barajas. "You're using it to eat and take care of the necessities."  

One thing that Barajas said to avoid if possible is any high-interest debt, such as payday loans.

House to vote today on $2,000 checks for Covid relief—Here's the latest
House to vote today on $2,000 checks for Covid relief—Here's the latest

Tap a retirement account

If you have a retirement account such as a 401(k) and are under age 59½, you could tap it through a penalty-free CARES Act-related distribution, but time is ticking as this was not extended in the latest stimulus package.

People hoping to pull from such accounts have until before market close on Dec. 30 to get the appropriate paperwork to their provider for such a distribution.

Depending on the plan requirements and investments held in the account, there might not be enough time to take advantage of this option, according to Eliza Badeau, vice president of thought leadership at Fidelity.

If you're over 70½ and didn't take the required minimum distribution from your retirement account earlier in the year due to the CARES act rules that removed penalties, you could take it now, said Barajas. He added that money could be lent to younger family members in need.

People are already at the end of their financial rope.
Leigh Phillips
CEO, SaverLife

Seek help beyond money

To be sure, these options are not ideal, as they might not be available to everyone who needs help and, in some cases, could further damage a family's finances by piling on debt or weighing on credit scores.

"People are already at the end of their financial rope," said Phillips. "We need to get this resolved for families as quickly as possible."

In the meantime, the $600 stimulus checks should extend a bit of a lifeline for those waiting on unemployment benefits to resume.

People should also make sure they know all the programs they might be eligible for so they can take advantage of them, said Phillips. That includes food benefits such as the Supplemental Nutrition Assistance Program, the eviction moratorium that is helping with housing or student loan deferral for some.

People can also look for resources in their community that can help with things such as groceries, rent and other needs, she said.

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CHECK OUT: Suze Orman: Don't pay off debt with a second stimulus check — here's your 'first priority' via Grow with Acorns+CNBC.

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