“How did you go bankrupt?” “Two ways. Gradually, then suddenly.”

In the famous exchange from The Sun Also Rises, Ernest Hemingway illustrates how small, seemingly innocuous financial missteps can accumulate over time to create one large disaster down the road. It’s a frightening fate, and it’s one that can be avoided. With healthy financial habits and strong financial literacy, you can weather even the most turbulent times.

Unfortunately, for many Americans those times have arrived. In the three weeks leading up to April 4, the Department of Labor reported 16.7 million new unemployment claims. With the economy slowed to a near standstill, there’s a good chance you’ve been affected by the global crisis in some way.

Whether that impact has been a direct change to your income or a more indirect anxiety about the future, uncertainty abounds. Financial literacy is key to weathering this moment and meeting the future in a position of relative strength. For National Financial Literacy Month, take some time to bolster your financial education. Here are four key topics to explore and resources to help you learn more.

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Credit Card Debt

Racking up credit card debt can be easy, in times of both boom and bust. It’s important to understand how credit works if you’re going to use it, because there’s a lot of misinformation circulated. For instance, many people—including doctors, lawyers, and otherwise well-educated, intelligent individuals—believe that you should always carry a balance to help your credit score. In fact, the opposite is true. The best way to boost your score is to pay down balances every month.

Because credit card interest rates are typically high, carrying balances can create a debt snowball that keeps gathering steam. If your balance starts to get out of control, there are ways to slow the accumulation. You might consolidate your debt into a personal loan or onto a card offering a 0% APR balance transfer. This buys you time to pay down the debt without astronomical interest.

Learn more about credit card debt with these articles:

• What Affects Your Credit Score? (Experian)

• How to Get Out of Credit Card Debt in 4 Steps (NerdWallet)

• How Does Credit Card Interest Work? (Credit Karma)

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Early Retirement Withdrawals

A tempting source of emergency funding is your retirement accounts. Unless you’re in financial crisis, it’s best to avoid this as long as possible. Early withdrawals come with tax penalties that deplete your hard-earned savings, and draining your accounts now will leave your future self without the necessary funds to retire. That said, there are exceptions, such as extraordinary medical costs. Learn more about the implications of early withdrawals:

• Early Retirement Distributions and Your Taxes (IRS)

• 7 Things to Know Before You Take Early Withdrawals from Your Retirement Plan (TaxAct)

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Prioritizing Payments

If you find yourself deciding which bills to pay now and which can wait, it’s best to know the consequences of each. For instance, missing a minimum payment on a credit card will directly impact your credit score. However, a bill that’s already in collections has already done its damage. You may be able to negotiate payment plans on other bills, such as medical debt. These resources will help you learn which payments to make first, which can wait, and which can be negotiated:

• Prioritizing Expenses (United Way)

• How to Prioritize Your Debt Repayment (The Balance)

• Prioritizing Bills Tool (Consumer Finance)

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Budgeting

Although budgeting may seem like a rudimentary concept, many people have never done it. It’s common for those with reliable income to have a rough idea of their spending that they adjust intuitively. In times of difficulty, however, the difference between “rough idea” and “strict spending

limits” can be a lifesaver. If you’ve never sat down and analyzed your expenses, prioritized them, and allocated your monthly resources, now is a great time to start. Even if you’re in a strong position presently, this skill is an important key to building and maintaining long-term wealth.

Get started here:

• How to Create a Monthly Budget (EveryDollar)

• Budgeting 101: How to Create a Budget (NerdWallet)

• The Basic Monthly Budget Worksheets Everyone Should Have (The Balance)

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If you have any questions about these concepts or concerns about your finances in this difficult time, help is just a phone call away. Call us to set up a time to talk.

https://www.dol.gov/ui/data.pdf

‍For discussion purposes only and in no way represents legal or tax advice. For advice regarding your specific circumstances, the services of an appropriate legal or tax advisor should be sought.

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