Financial Psychology Center

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Lisa Rowan

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Food Banks Are Seeing High Demand Right Now. Here’s How You Can Help

(Forbes) – Among the economic issues laid bare by the ongoing coronavirus pandemic, food insecurity may be the most striking: Aerial photos of pick-up lines at food banks around the country show lines of cars that stretch for miles.

And as many relief programs are set to expire at the end of December, that demand is likely to increase. Access to food was already a major issue in the U.S. before the pandemic—more than 35 million people experienced food insecurity in 2019, according to food bank network Feeding America, a number that the U.S. Department of Agriculture expects to jump to about 54 million in 2020. This month, nearly 15% of households with children reported not having enough to eat, according to a U.S. Census Bureau survey.

If you want to contribute to organizations that work to alleviate hunger in the United States, there are a few factors to keep in mind to ensure that your donation is effective and impactful.

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Why It’s Better to Give Cash Than Canned Goods

When you think of donating to a food bank or other organization that works to alleviate hunger, you might automatically reach for the nonperishable goods. But your money can do more than a couple of boxes of shelf-stable items can.

Because food banks work with manufacturers and grocers, they can obtain food at far less than the cost you pay at the grocery store. Feeding America says that every dollar donated can help secure and distribute 12 pounds of food—that’s about 10 meals.

But it can feel strange to open your wallet instead of your pantry. Giving a physical food item is a tangible gift, whereas a cash or digital payment feels less personal, said Dr. Alex Melkumian, a psychologist and founder of the Financial Psychology Center.  “We associate our memories of being fed with emotions of love and care and want to provide the same for others, especially during such a tough time,” he says.

Read more: Your Guide To Charitable Giving For The Holidays

That brings up another challenge this year: You might not be struggling to access food, but there’s a good chance you’ve had to rebalance your finances due to the economic effects of the pandemic. How can you make a difference when you’re anxious about getting by yourself?

Melkumian said that worrying that your gift—financial or otherwise—isn’t big enough can send you spiraling into feelings of shame and guilt that prevent you from taking action at all. “Perfection is the enemy of progress,” he said. “Your gift or donation doesn’t have to be big nor does it have to be financial.” Your time, support on social media, and even a smile can contribute to the spirit of giving we want to contribute to at this time of year, he said.

Here are ways you can make a difference, no matter your budget.

Plan a Monthly Donation

It feels natural to donate to your favorite charities at the end of the year, when you’re filled with holiday cheer. Just look at the success of Giving Tuesday: Nearly $2.5 billion was donated to various organizations in the United States this year, a 25% increase over last year.

And although nonprofits of all sizes are surely grateful for those donations, that dramatic influx of money one day a year can make it hard for nonprofits to plan their budgets. That’s why many organizations encourage recurring donations.

“Monthly and quarterly recurring gifts provide charities with a steady stream of revenue throughout the year,” writes Ashley Post at Charity Navigator. This allows charities to plan well for the months ahead because they know what they have to work with.”

You might be worried you don’t have room in your budget to donate regularly. But even small amounts can go a long way. A monthly $10 donation adds up to $120 over the course of a year. And it also makes it easier to fit giving in your own budget each month, instead of saving for a larger contribution.

Host a Virtual Food Drive

Like so many activities during the pandemic, hosting a food drive has gone virtual too. And with the power of social media, it’s easier than ever to pool together funds to help people in your community. Food banks like Feeding America offer virtual fundraising platforms, or you can set up a virtual drive through Facebook.

A virtual food drive can help you round up friends and family to make a more sizable donation than they would be able to individually.

Use Your Employer Match

No matter how modest your own donation may be, you might be able to multiply the donation to your favorite organization with an employer match.

About 75% of medium and large companies offer some sort of employee giving program, says Bryan de Lottinville, CEO of corporate giving platform Benevity. But only 10% of employees participate on average, leaving a lot of money on the table.

“Often, employees are not even aware that their employer has a program, or it applies to a narrow list of eligible charities, or more frequently, the process for accessing the matching funds is so clunky and cumbersome that many time-constrained employees don’t bother,” de Lottinville said.

But taking a little time to figure out your employer’s system could have a big impact. The most common match is one-to-one (so for every dollar you donate, your company will match with another dollar, typically up to a certain amount), de Lottinville said, he’s seeing more companies offer two, three, or even five-to-one matches.

If your company processes matching payments manually, there may be a minimum donation amount. But if it uses a software program that processes payments electronically, you can likely donate any amount, de Lottinville explained. “It could be as little as $5 that turns into $10—or more,” he said.

Take the New Tax Deduction

Nonprofit organizations have long noted the tax-deductible nature of your donation in order to encourage donations. But unless you itemize your deductions each year, you typically don’t see any tax savings in exchange for your generosity. That will change when you file your 2020 taxes in spring 2021. The CARES Act allows taxpayers to deduct up to $300 per year, even if you take the standard deduction. The catch is that only monetary donations count toward this deduction—donated goods do not. This new deduction won’t be much help to you right now, but it may provide a small benefit when it’s time to file your tax return.

Read more: 4 Financial Tax Breaks To Help During Covid-19

Consider Volunteering

Short on cash, but have a little time? Many organizations are in need of additional volunteers this year to fill in for those who can’t serve due to health concerns. But food banks are keeping social distancing in mind, and offering opportunities to work at contactless or drive-up pickup locations.

Some food-focused nonprofits have converted some of their volunteer positions to virtual ones—you can perform tasks like writing notes or making calls to thank donors from the comfort and safety of home.

It doesn’t take much time to make a difference. Meals on Wheels delivery routes are planned to take about an hour and a half, and you can commit to delivering just once a month if that’s all your schedule allows.

You may be able to make your volunteer hours go even further through an employer-sponsored plan, de Lottinville said. Some workplace programs reward volunteer hours with currency that can be donated to a cause of your choice.

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How To Cope If The Covid-19 Pandemic Has Stretched Your Finances To The Limit

(Forbes) – Americans say they’re saving money. Retail spending is up. Low interest rates have sparked the housing market and the stock market has rebounded from its initial pandemic dive.

But how does any of this make sense when so many people are struggling financially months into the Covid-19 crisis and the recession that came with it? The unemployment rate is high, unemployment assistance is about to expire again in some states, overall consumer spending is down and mortgage delinquencies are on the rise.

The reason is what’s expected to be a K-shaped economic recovery, which disproportionately impacts different segments of the economy. Even now, more than six months into the pandemic, some households’ finances are largely untouched, while others are looking at a long and arduous recovery.

For many, weathering what has become a longer-term financial storm will require more than just an emergency fund. An individual’s financial issues are so closely tied to the state of their mental health, and the ongoing stresses of the coronavirus pandemic are well documented.

While you cannot predict how—or when—the American economy will recover from this period, you can take some time to reframe how you think about your finances on an emotional level.

Here’s what you need to know about protecting your finances and your mental well-being during these uncertain times.

What Is a K-Shaped Recovery?

An economic downturn and its eventual recovery can take many shapes. You may have heard of a V-shaped or U-shaped recovery. But one thing these often-referenced shapes have in common is that widespread financial challenges usually are met with widespread recovery, albeit by various degrees for individuals.

A K-shaped recovery, however, sees two groups diverging from an economic turning point, instead of tracking a single curve of decline and recovery. More affluent individuals see their situation as stable or improving during a downturn—they’re the upper portion of the K—while others experience devastating losses.

There are signs that this is happening now during the Covid-19 crisis.

People earning between $25,000 and $35,000 were nearly three and a half times more likely to report having a “very difficult” time paying for usual household expenses than those earning between $100,000 and $150,000 per year, according to a late-August survey by the Census Bureau.

Take the hospitality and leisure sectors for example, explains Brian Kench, dean of the Pompea College of Business at the University of New Haven. “Only about half of lost jobs have come back,” in those sectors, he says, due to continuing virus concerns.

Benefits designed to stabilize people who haven’t been able to return to work or find new employment—if they have been able to access those funds—are likely to run out. The grim employment outlook plus strained finances compounds the recovery process for these individuals.

“The lower part of the K feels like it’s sliding even deeper,” Kench says.

If you have large swaths of people who can’t earn money to pay their bills and make purchases, it’s going to take longer for the economy as a whole to show vast improvements, even if there are a lot of people who are doing relatively well.

And for many people, the impact of that slower recovery track can have long-term effects on their ability to earn and amass wealth.

A recent survey found that households of color face a more challenging financial landscape than their white counterparts, often with less access to aid programs like the Economic Impact Payments, popularly known as the stimulus checks, authorized by the CARES Act.

Households of color were still trying to regain ground from the last financial crisis before the coronavirus pandemic came along. Income for Black households didn’t surpass 2007 levels until 2019, according to new Census Bureau data on income and poverty.

“But that’s already old news,” said Valerie Wilson, director of the Economic Policy Institute’s Program on Race, Ethnicity, and the Economy, during a presentation this week. “The impact of the pandemic and the recession has had a disproportionate impact on Black workers and their families,” Wilson explained.

Impact of Uneven Recovery Felt on Individual Scale

Recognizing a K-shaped recovery can help acknowledge that not every part of the economy recovers at the same pace. Much of the process is ultimately felt at a personal level.

“A lot of industries are going to be hard hit for an extended period of time,” says Leigh Phillips, CEO of financial technology nonprofit SaverLife. “Schools aren’t back, childcare is not back and that obviously impacts a lot of families.”

Almost 90% of users of SaverLife’s financial education platform—who tend to earn about $25,000 per year—have reported a loss of income due to the pandemic.

“But that loss of income has been paired with simultaneous increased spending,” Phillips says. Households who weren’t already set up for remote work or online learning had to figure out how to cover the costs of internet access or devices, she explains.

And families who may have had their grocery costs supplemented by school meal programs may suddenly have been faced with the need to provide three meals a day at home, during a time when food costs increased, Phillips says. “Even for people who receive supplements from the government to pay for food, we’re still seeing much higher spending in that category,” she says.

SaverLife has been encouraging members to claim their stimulus checks or unemployment benefits if they haven’t already, along with pointing them to food assistance programs in their areas. The organization also partners with financial coaching programs around the country to help users work with their creditors.

But taking those first steps to access help can be challenging, especially since some of the initial shock of the pandemic’s economic impact has dulled.

“People don’t necessarily want to confront some of these issues right now,” Phillips says. “They’re frightening. But the more that you can [do to] get all the assistance you can, the better off your family’s going to be.”

How to Cope With Longer Periods of Financial Strain

With the U.S. pandemic response in its seventh month, you may have already exhausted your initial sources of financial security, whether in the form of an emergency fund or government aid. But before you strategize a long-term budget to weather this period, it’s helpful to recognize your emotional state.

In the first few weeks of the pandemic, you may have felt a fight-or-flight response to adapt to the immediate changes. But that response may no longer be enough to support you through this next phase, warns Dr. Alex Melkumian, a Los Angeles-based psychologist and the founder of the Financial Psychology Center.

Some people have fewer coping mechanisms to maintain that “fight” response for a long period, or never had the resources to be in the position to fight in the first place, Melkumian says. He uses the example of someone who loses their job suddenly and needs to apply for unemployment. “For some people, that’s a devastating place to get to in their career.”

Add that grief onto the difficulties of navigating state unemployment insurance systems and the health concerns brought on by the pandemic, and the stress you feel can start to stack up—which can do long-term damage to your relationship with money.

“Money can be a conduit for anything we’re emotionally filled with,” Melkumian explains. “If we’re full of fear and anxiety, it’s going to [show] in our behavior and our decision-making with money.”

Melkumian says that beneath patients’ frustration with their financial situation are often feelings of shame and guilt. And, to persevere over the long term, you need to address that emotional side of dealing with money. “When we fight our emotional nature, we do ourselves a disservice. The longer we ignore, the longer recovery will take.”

Acknowledge Feelings of Shame and Guilt (But Don’t Dwell)

Whether you were struggling before the pandemic or your financial challenges are more recent, recognize that a lot of people are in a tough position. This is not the time to feel guilty because you weren’t better prepared.

“During this crisis, priorities may need to be made that focus on the present, and that is okay,” says Sarah Parker, senior director at the Financial Health Network. “Emergency funds may need to be tapped, and that is okay because it’s exactly what they’re there for.”

If your funds are coming up short for basic needs, don’t wait to ask for help. “Don’t be so ashamed and guilty that it prevents you from reaching out for help,” Melkumian says. Many financial institutions are still working with customers to offer forbearance programs, and you may be eligible for aid beyond the channels you’ve already pursued.

“Understand you need to give yourself the room to process, to get through the emotional stuff,” Melkumian says, but don’t let it pull you into a spiral of shame that’s harder to get out of later.

Take Small Steps Toward Recovery

Don’t worry about making the perfect budget right now. But do your best to plot out your obligations, resources and any accommodations you’ve requested.

“Our research shows that planning behavior is highly correlated with improved financial health,” Parker says. “People often don’t plan because they feel overwhelmed by it, especially those with strapped budgets already. But starting somewhere with a small degree of planning for the rest of the year into the next will help.”

Thinking about your goals—even if it’s just covering the basics—can help you start to see incremental progress, Parker says.

For a boost, try using free budgeting apps that can help you track your spending and help you plan ahead. “There are many apps that analyze spending patterns and cash flow to help consumers determine what their disposable income is without jeopardizing their financial obligations when those bills roll around,” she says.

Check In With Yourself

Melkumian recommends taking a few moments to do a daily emotional self-check to catch brewing financial fears before they grow larger than life.

Since you can’t predict how long the widespread economic recovery will take, you can’t let yourself get overwhelmed with daily what-if scenarios, he warns. “Everyone wants their financial world to improve immediately,” Melkumian says, but that hope can manifest irrational expectations.

It’s important to develop a mindset that can see how small improvements in your finances that may seem insignificant now can have a bigger impact a few years from now. Doing so can take time, so be patient with yourself as you continue to check on your emotional state and financially recover.