Planejar maintains partnerships with some media vehicles for publishing content, with the objective of disseminating financial education and the financial planning activity, by means of responses to questions from readers, performed by volunteer spokespeople, covering issues related to personal and family financial planning.
The partnership with Época Negócios, an important economy and business magazine, occurs on the online column Seu Planejamento Financeiro (Your Financial Planning, in a free translation from Portuguese), published on Tuesdays at https://epocanegocios.globo.com/colunas/Seu-Planejamento-Financeiro/plantao.html. In spite of the vehicles having different audiences, the focus is on the individual consumer.
The banks are allowing me to postpone a loan payment installment during the crisis. Is it worth taking advantage and paying it later?
Any measure that gives the household budget a helping hand is welcome. The possibility of postponing the payment of debts, to be negotiated with the banks, should only be considered if no interest is to be added and after all other alternatives were exhausted. It is also good to comment that not all debt is bad, but you should avoid becoming indebted to finance consumption, such as spending on food. Upon having the need to go into debt, you must prioritize what builds equity, such as, for example, financing a property.
In any scenario of uncertainty, we must have financial resources available, called liquidity, to meet our expenditures. We have a global economic crisis which was triggered by the eminent need of combating the coronavirus and not knowing when it will all end. And we know that not everyone has sufficient financial reserves to sustain this moment of reduction or loss of income from work.
There is no pattern of talks between the banks for postponing debts. Upon contacting them to ask for an installment pause, check the conditions offered. There are banks that are renegotiating contracts and adjusting installments with interest. If postponing installments incurs the payment of interest, this decision should be your last option.
Before assuming as necessary to postpone paying your loans, start by determining all your current expenditures. First check what changes you can make in your spending patterns to optimize your household budget. Social distancing alters our cash flow. If on the one hand we can reduce transport costs, on the other hand there can be an increase in housing costs. Furthermore, with the more intensive use of the Internet, we can also find alternatives to generate additional income. So, the first step is to calculate income and expenditures!
Then check if the interest of your present debts can be reduced. You can exchange more expensive debts for less expensive ones. There is also the option of real estate financing portability to reduce the amount of the installments.
Finally, if your cash flow balance remains negative after all rationalization measures were taken, use your financial reserve to complement your budget if you have such reserve. Even if after all to postpone debts is a necessary measure, to follow the rationalization steps and to make a financial planning are inevitable to identify solutions to the 60-day palliative. To rationalize means to make rational use of available financial resources to balance income and expenditures and to sustain a desirable standard of living.
A lot of us are repairing the roof of our personal finances during a storm that took us by surprise. At some point the rain will decrease. Perhaps the force of the impact of this storm even resulted in some additional corrective measures, such as postponing the payment of a debt to free up more money in the budget at this moment. But moving forward, it is always good to remember to make preventative use of financial planning to repair the roof while the sun is shining.
Carlos Castro, CFP®️