Thenovelcoronavirusisaffectingnearly all of us insome way. Associal distancing becomes a reality,we need to pay attention tothe effect it could have on ourfinancial health as well.
This is anunprecedented time, particularly after thelongesteconomicexpansionin our country’s history.But we’vebeenin unprecedented times before.Through wars, global health crises and recessions, the American people and the economyalways bounce back.
There’s no reason to believe that today’s uncertainty will be any different.Medical experts believeaggressive social distancing measuresnowcanhelp slow the spread of the coronavirus so we can get back to normalsooner.In the meantime, as you focusontaking steps toprotect your health,here aresixtips toweather financial uncertainty.
Next time you want to check on the markets, considerreading this first.
It can be difficult to watch your investments fall asthey have over the past several weeks.But this is a good time to remember that stocksare for long-term growth.You shouldn’tneedmoney invested in stocks for years,which meanswatching what’s happeningeach day will only add unduestress right now.
We knew this would happen(or something like it). While no one couldhavepredicteda pandemicsix months ago, unexpectedglobal events and subsequentmarket disruptionsare a reality of investing. On average, a bear market (a selloff of 20 percent or morefrom a peak)occurs once every 6 years or so. In every past case,the market haseventuallyregained its losses and pushed higher.
Some of us will take our laptops home and continue to work, largely unaffected financially by social distancing. But if you’re an hourly worker, contractor or business owner, the financial effects may be more pronounced.
Regardless of whether you’re spending less, earning less or both,your budget is likely to change in the coming weeks.Now is a good time to pay more attention toyourcash flowand adjust on the fly.
If you’re in a situation where you’re earning less, there may be places where you can cut backwithin your budget.Naturally, that willinclude spending less on going out.But ifyoustillneed to free upextra cash,look at anydiscretionaryspending that you could temporarilytrim. Additionally,you couldalsoconsider deferringother types ofspending, such as anyextrayou’ve been putting towarddebt paymentsthat go above theminimumowed.
Emergency funding is a critical part of financial planning. Ifyou’ve built up anemergency fundin a savings account, this is the time to use those fundsif you need money to make ends meet.
If you haven’t built up an emergency fund yet,or don’t think there’s enough inyoursto cover your needsin the coming weeks,that’s okay too.You still have options:
Life Insurance:If you have a permanent life insurance policy that’saccumulatedcash value, you canusuallyaccess that moneyrelatively quickly and easily.Most times, thebest way to do that is to take a loan against your policy from the insurance company.Here area few things you should knowbefore taking a loan from your life insurance.
Lines of Credit:If you have an open line of credit, like a home equity line of credit (HELOC)or even credit cards, check on your credit limit and the interest rate you will oweif you tap intothe line.This is an easy place to get money quickly.But it’sa good idea to first take money from accounts with the lowest interest ratethen move on to the next lowest,and so on.
If you have a mortgage,student loan or other debt,chances are that rates today are better than what you’re currently paying(in fact, rates are historically low right now).Refinancing typically can take weeks or even months to complete. But if youcanlower your monthly paymentin the long term,it may be worth it for you.
You could use that extra money in your monthlycashflow to replenish your emergency fund,ortopay off anynew loans or credit debtthatyoutook on tomake ends meet.Orif you can afford to, you could also usethatextra moneytowardthe next tip.
If you’re in a position where your incomewon't beaffected in the coming weeks,make a point to spendsome of yourmoney to helpthosewhose income could be. Maybethat means gettingcarryoutfrom a restaurant(many are expanding their take-out optionsto promotesocial distancing), booking a tripin the future,buying a gift certificate from a local business,ororderingsomething from a local shop.Safety shouldbeyour toppriority, butcontinuing tospend your moneycanbe one waytohelpsupport your community.
If you have a financial plan, once we get through this, it will be a good ideatoreview yourstrategyto see ifit needsupdates — perhapsrebuildingyour emergency fundwill carve out a larger slice of the budget.
If you don’t have a financial plan,ourfinancial advisorswould be happy to help you put one together.Financial planning that considers your goals for the future, but also the risks that can get in the way, can go a long way to setting you up to weather a crisis like this in the future.
