The coronavirus pandemic has created a very uncertain market environment right now. However, your long-term financial goals are probably still the same: buying a house, getting your kids through college, starting your own company, giving back, and retiring on your own terms.
The path towards those goals might have swerved a little in the past few weeks. But if you are still working and your income hasn’t been disrupted too severely, these four tips will keep you heading in the right direction.
- Re-budget.
The pitfalls of online shopping haven’t changed just because you’re ordering essential supplies and food in a crisis. When (mostly) everything you want is just a click or swipe away, it’s all too easy to buy everything. You might think you’re spending less just because you’re not going out for meals and entertainment right now. But if you’re not keeping track of your clicks, you won’t really know until you get your credit card bill at the end of the month.
A little bit of planning and budgeting can spare you a major spending shock. Take stock of what you really need before logging into your shopping account. Schedule a week or two of meals so that you’re not ordering out every other night. And think before you click on every discounted movie, online class, or entertainment subscription that pops up on your screens.
Also, take a hard look at any subscriptions and extracurricular activities you won’t be able to use during social distancing. Call up your local theatre company, your kids’ soccer team, your gym, and see what options you have for recurring charges or fees you’ve already paid. You might want to keep supporting some of these organizations, especially if they’ve moved their content online. Others might be costs you’re better off recouping now if possible.
- Build up your emergency fund.
Ideally, your stay-at-home budget should be less than what you’re used to spending in a typical month. For most folks, the best use for extra funds is to build up your emergency savings account. Even when interest rates are low, we recommend that you have enough money set aside to cover six months of your living expenses. That reserve could be critical in this crisis, especially if there’s a sudden health issue or necessary home repair.
Once we get to the other side of this crisis, a healthy emergency fund is going to be an important cornerstone of your retirement plan.
And if what you’re saving on gas, daily Starbucks, and twice-weekly carryout lunches is getting swallowed up by your online shopping … Take another look at that budget.
- Give responsibly.
It’s been inspiring to see communities rally around restaurants and other small businesses that have adapted to social distancing. Many of these establishments have implemented contactless delivering or curbside pickup, which keeps customers safe and helps business to go on as best as it can. People are also buying gift cards and donating to funds that support the newly unemployed, charitable organizations, and health care professionals.
We’re glad that the pandemic has inspired charity and goodwill in so many people. But remember that giving is still spending. If going out to dinner three or four nights every week would hurt your normal budget, delivery will do the same. Buying every gift card and donating to every cause could throw off your budget just as easily as overspending on groceries. Even your best intentions need to have limits.
- Explore your options.
Once you’ve covered your basic needs and emergency savings, there are other things you should consider to stay on track for your long-term financial goals:
- Under the new Coronavirus Aid, Relief, and Economic Security (CARES) Act, married couples could be eligible for more than $2,400 in tax rebates, depending on their income level and number of dependent children.
- The CARES Act also established loan programs for many small business owners if you need help covering essential expenses.
- Younger investors might find opportunities to invest at a discount. Older investors might want to reallocate to cash and bonds.
- Interest rates are low, so it could be a good time to look into refinancing your mortgage. You could also investigate home equity credit lines and mortgage deferment options.
- If you’re really struggling to make ends meet because of the pandemic, it might be possible to tap into some of your retirement assets to help you through the next couple months.
We’ve been hard at work sorting through all of these details, as well as other options that we believe could benefit our clients. Let’s have a conversation about how your monthly budget is adapting to the pandemic, and how we can help you keep moving towards your financial goals.
