The COVID-19 outbreak has led to an economic crisis that has many worried about the future of their financial security. Unemployment rates are rising and that has made Americans anxious about how they’re going to pay their bills. It’s definitely a scary time for all but we can try to avoid feelings of helplessness by taking control of your finances. So far, COVID-19 has taught us about the importance of emergency financial planning during a crisis, so we’ve come up with seven things that you should do to prepare for the journey ahead.
1. Rethink big purchases
The first thing you should do when stressing about your finances is to alter your spending habits. During an economic downturn with an uncertain timeline, it’s important to make your money last as long as possible. This means that it’s a good idea to cut back on nonessential things, which you can do by creating a finance budget. Don’t cut too far back, though, because self-care is definitely important during this time, so if you need a few extra snacks or a new pillow, those can count as essentials. It’s also beneficial to your community and the economy in general to help out your local businesses by ordering food and other products. .
2. Maintain an Emergency Fund
As you begin cutting back on your spending, use the leftover money to add to your emergency savings. Your emergency fund should be a cushion of liquid money that you can pull out of the bank at any time to cover rent, food, or supplies. Having emergency savings is important in general, but especially now during a global crisis. A good rule of thumb is to have enough money to cover three to six months worth of your essential expenses—aim for six. If you’re still working, it’s a good idea to keep adding to your emergency fund just in case.
3. File Your Taxes Early
The IRS pushed tax day from April 15 to July 15, but that doesn’t mean you should wait. The sooner you file your taxes, the sooner you will receive your stimulus check and refund—if you’re expecting one.
4. Try to Leave Stocks Alone
As the stock market continues to swing dramatically, try not to worry. Cashing out of stocks altogether to avoid losses will only solidify the losses that you’ve already absorbed. This means you shouldn’t sell from anything drastically down in value from your portfolio, no matter how tempting it is. Remember, a loss is not realized until a sale is executed. Staying invested properly based on a variety of other personal things is far more often the best course of action.
It is natural to go into survival mode and start thinking short-term, but successful investing requires patience and optimism that things will eventually get better. Try to think 3 years out vs. 3-6 months from today.
5. Strategically Manage Retirement Funds
For those who are still working, you may be thinking that with everything happening now, saving for retirement should not be a priority. While you definitely should be ensuring that your emergency savings are taken care of, you should also still be saving for retirement as best you can. It’s important to keep funding your 401k or IRA if you’re financially able because you can lock down some discounted investments that can grow over time.
If you’ve already retired, you’ve probably seen your retirement portfolio take a hit. This can create a great deal of fear and uncertainty, and it’s absolutely the time to talk to a financial advisor. It is a good time to examine your spending and look at how your assets are invested, even if the best course of action is making no change at all.
6. Seek Financial Advice
It may be in your best interest to meet with a financial advisor. They can answer all of your questions and help you prepare for the future and optimize your financial habits for the upcoming months. Managing a stock portfolio, 401k, IRA, and emergency savings fund can be a lot of work to take on alone, especially while you’re busy worrying about how to make ends meet and keep you and your family safe and healthy. Hiring a financial advisor can really help to relieve some of that stress.
We’re Here to Help
Many are struggling financially right now, which means that making smart long-term financial decisions is just as important as staying safe and healthy. Here at Chatterton & Associates, our financial advisors want to help reduce your anxiety around money so you can focus on what you need to do to get through this crisis. If you’re feeling overwhelmed with your finances, we are here to help. We can help set up accounts, apply for loans, optimize assets, and budget future expenses. Contact us today for more information. We are still meeting with clients over GoToMeeting so that you can stay home and stay safe while getting the guidance that you need.
The Team at Chatterton & Associates
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.