The economic impact of the coronavirus pandemic has been felt worldwide. In the US, many Americans have had to change their financial goals and habits due to the recession. Millions of people remain out of work, while others are dealing with slashed pay and reduced hours. The country is still struggling to recover, and the future remains uncertain. To help navigate through these challenging times, financial experts are giving their clients some useful advice. In this article, we will discuss four essential tips to help manage finances during the pandemic.
Zoom Out: Keep Your Goals in Mind
Uncertainty can cause anxiety and worry for many people. However, it’s essential to think about your financial goals in the long term. According to Ken Thompson, the head of U.S. wealth shared services at TD Bank, you should consider your goals ten to fifteen years from now. If your goals haven’t changed, you should continue investing and saving if you can afford it.
Thompson believes that we have gone through many difficult times in the past, and we will get through this one as well. However, if the current situation has made you rethink your priorities, it’s okay to reassess them. You should prioritize what makes you feel the most comfortable.
Focus on What You Can Control
Many financial factors are out of our control, such as the stock market. However, some things are within our control, and we should focus on them. Sarah Behr, a financial planner and owner of Simplify Financial Planning, suggests that we should start by setting up auto-pay for all of our bills, including rent, mortgage payments, and utilities.
Behr believes that everyone needs to have a will, a financial power of attorney, and an advanced healthcare directive. These documents are crucial if you become ill or incapacitated. They allow someone else, such as your partner or friend, to access your financial accounts and make medical decisions on your behalf.
Rethink Spur-of-the-Moment Decisions
The housing market has been booming in 2020, with many workers leaving big cities for less expensive suburbs and small towns. However, it’s essential to be cautious about buying and moving, says Behr. Just because mortgage rates are low doesn’t mean you can afford a home right now or in the near future.
Behr advises considering what would happen if your job cut your pay or if you got laid off. If you had to tap into your 401(k) to make the down payment, it’s not really affordable. You should also consider what would happen when you have to return to the office or find a new job. If you move to a small town with fewer employment opportunities, you might regret it. Behr advises buying only if you know you’ll stay in the house (and be able to afford the payments) for eight to ten years.
Look for Opportunities
Although trimming spending won’t solve all financial issues, it’s still an excellent opportunity to rethink spending and shift it to new priorities, writes Danielle Schultz, a certified financial planner based in Illinois. Discretionary expenses such as eating out, travel, and spending on children are the easiest categories to make changes in the budget.
According to Schultz, it’s an ideal time to set actual spending targets and reduce unnecessary expenses. You can also take advantage of low-interest rates to refinance your loans or consolidate your debt. By taking advantage of these opportunities, you can reduce your financial stress and improve your overall financial well-being.
Conclusion
In conclusion, it’s essential to focus on your long-term financial goals, control what you can, rethink spur-of-the-moment decisions, and look and what can help you stay on track with your financial goals. The pandemic has brought a lot of uncertainty to our lives, including our financial well-being. However, financial experts have been providing valuable advice to help individuals navigate through these tough times. These pieces of advice include zooming out and focusing on long-term goals, prioritizing what you can control, rethinking spur-of-the-moment decisions, and looking for opportunities to adjust your spending habits. By following these tips, individuals can better prepare themselves financially and minimize the impact of the pandemic on their lives.
FAQs
What is the most important piece of financial advice during the pandemic?
During the pandemic, it’s important to prioritize what you can control financially. One of the best things you can do is to automate your bills and make sure that you have a plan in place for the end of your life. This includes creating a will, purchasing life insurance, and designating beneficiaries for your accounts. These steps can help provide financial security and peace of mind during uncertain times.
How has the pandemic affected the housing market?
The pandemic has brought about changes in the housing market. Many people have been leaving big cities for less-expensive suburbs and small towns, resulting in increased competition for housing in those areas. While this may make it more difficult to buy a home, it’s important to consider your own financial situation before making any major purchases. Take into account your income stability, savings, and long-term financial goals.
What can I do to adjust my spending habits during the pandemic?
If you want to adjust your spending habits during the pandemic, start by evaluating your discretionary expenses. Consider how much you’re spending on things like eating out, travel, and children’s activities. Set realistic spending targets and adjust your budget accordingly. For example, if you’re spending $300 a month eating out, try cutting back to $100 a month and redirecting the savings toward something more important.
Is it a good idea to stop investing during the pandemic?
It’s not a good idea to stop investing during the pandemic if you can still afford to do so. While it’s understandable to feel uneasy about the market’s volatility, it’s important to consider your long-term goals. Remember that investing is a long-term strategy and market downturns are a natural part of the investment cycle. Stopping your investments may hinder your ability to reach your financial goals.
How can I stay on track with my financial goals during the pandemic?
To stay on track with your financial goals during the pandemic, it’s important to have a plan in place. This includes creating a budget, sticking to it, and adjusting it as necessary. Consider working with a financial planner to help you navigate through these tough times. They can provide expert advice on how to allocate your resources, adjust your investment strategy, and manage your finances to weather any financial storms that may come your way.