SANTA BARBARA, Calif. - People who can't rely on essential jobs or careers making a comeback during the COVID-19 pandemic are in the midst of a financial crisis that makes spending on anything difficult.
Some people are using their credit cards to maintain their standard of living.
Tim Tremblay of Tremblay Financial Services in Santa Barbara advises clients not to max out their credit cards or use them more often.
He said the interest is too high.
"Because of COVID-19, the rules have changed. You can borrow as much as $100,000 out of your IRA, or your 401K, and you can pay it back within 3 years. Don't use a credit card. It is the worst thing you can do."
People are learning the hard way about what financial advisors call the"Lifestyle Creep," It refers to people spending more during the good times that can easily be disrupted while they are still paying off the items.
Tremblay said the pandemic is a reminder to live within your means.
It's an old adage that remains true.
The same can be said about saving emergency funds. These days people are lucky to have 3 months of expenses in a savings account. A better rule of thumb is to have savings that can cover six months of expenses.
Panic buying of items such as toiler paper is another thing to avoid. It can hurt retailers and neighbors and impact inflation.
People who learn lessons from the financial impact of COVID-19 will be well equipped to handle the next crisis.
Tremblay said it is not too late to work on a personal financial recovery plan.