The COVID-19 pandemic has everyone wondering if life will ever return to “normal.” This virus has impacted almost every aspect of our day-to-day lives; kids are engaged in virtual learning, parents are working from home, travel plans have been canceled, and countless people have suffered pay cuts and unemployment.
All of these things (and more) have had a substantial effect on our finances. New expenses have arisen and/or income streams have been removed. Nevertheless, there are ways we can survive, and even thrive, in the unique financial climate of this pandemic. As you consider your financial situation, implement these tips from our fee-only financial planners to continue to build wealth — even in the middle of what seems like an economic catastrophe.
Stock Your Emergency Fund
First, ensure that you have a suitable emergency fund. The amount in an emergency fund should cover all financial expenses for six months. This amount will vary by family/individual, depending on income and spending. If you do not already have an adequate emergency fund, now is the time to focus on building this fund.
Additionally, don’t be afraid to use your emergency fund if needed. That is what it is for! Use your emergency fund before going into debt or cutting into other savings if you lose your job or experience other extenuating circumstances.
Adjust Your Budget
Do you have a budget? If not, get to creating one. If you do have one, then sit down and crunch some numbers. It may be time to create a “slimmed down” budget that can help you save a little extra money each month. Consider subscriptions that you may not be using and other “fun” spending that you can go without for a few months. A little bit of budget tweaking can go a long way in the world of savings.
Be on the lookout for more stimulus checks. While nothing is final yet, both parties in Congress have expressed a desire to send another round of stimulus money to American citizens. Make sure you have a plan to use that money to your best advantage if this happens. This can mean adding to your emergency fund, paying down debt, or adding to your retirement portfolio.
Time is Money
How are you spending your extra time? If you are a working parent who is now homeschooling multiple kids, the concept of “extra time” may be laughable. However, there are numerous people who have reported having extra time during this pandemic. Consider what services you are currently paying for that you now have the time to do yourself! These things could include cooking more at home, doing your own yard maintenance, or canceling your housekeeping service. A little DIY could create that extra cash you need to invest in your emergency fund or supplement another area of your budget.
Add to Your Portfolio
It may sound counterintuitive, but the best time to add to your portfolio is when everyone else is selling. When the market is low, it is basically like buying stocks on sale. You get more for your money! While everyone else is losing money and selling their shares, choose to invest money into the market. Then, when the market (inevitably) starts to climb once again, you can sit back and watch your money grow. Markets have mostly recovered from the initial crash in March, but another dip is certainly possible. If another dip comes, it may be wise to be prepared to take advantage of lower prices.
Evaluate Your Student Loans
In March, the Trump Administration announced that they would waive all federal student loan interest until further notice. If you are currently paying off student loans, this could give you the opportunity to rework your payment plan.
For example, you may decide to put a pause on paying off your student loans and instead focus on building your emergency fund, knowing that your loans are now interest-free. Make sure you are working closely with your financial planner as you make plans to pay down student loan debt.
Meet with your Financial Planner
There isn’t a more important time to meet with a financial planner than right now. During times of economic uncertainty, it is essential to evaluate your financial standing, rebalance your portfolio, and make plans for the future. A trusted financial planner will help ensure that you have a plan to reach your financial goals — even during a worldwide pandemic.
Residents of Salt Lake City and the surrounding areas who are looking for more budgeting tips for professional and experienced wealth management experts who have your best interests at heart can contact TrueNorth Wealth today to speak with an advisor.