As we are in the middle of a world-wide pandemic, many things seem uncertain. The outbreak of COVID-19, constantly changing behavior expectations to attempt to contain the virus (when will schools and offices re-open?), and intense market volatility it’s no surprise that many of us are feeling that way. . Unemployment rates are the highest they’ve been …ever. Millions of people are unemployed and have no foreseeable outlook on the future as of right now. Many people are getting laid off or having reduced hours at work in order to try to control the virus. We are in uncertain times and this scares lots of people. It honestly scares me. You want to try to control every aspect of your budget especially at these times because you don’t know how much longer we will be going through this. It seems almost unimaginable that things have gotten this far and this is the world that we are currently living in. In 2020 it seems almost incomprehensible that this has happened and we are going through this. Parents have to not embrace children being out of school and doing school work online, while those of us still currently employed are also working from home. The family dynamic is being stressed in lots of different ways. People are concerned more and more every day of whether or not they will still have a job. That alone is a lot of stress, worry and uncertainty. While there are many things that are uncertain in this ongoing pandemic, there are some things that you still can do to make sure you protect yourselves financially.
1. Check In On Your Emergency Fund
Emergency funds are one of those core pieces of money advice that everyone manages to learn. It is definitely important in times like this. About half of Americans reported they had three months of expenses in savings for emergencies, in line with a general benchmark for financial health. However, about 40% said they would struggle to cover a $400 expense in cash. Whether or not you have savings, now is the time to check in on how far your money can stretch. Having an emergency fund to fall back on is hugely important. Times like this are very uncertain and if you don’t currently have an emergency fund, it’s best to start thinking about creating one.If You Currently Have An Emergency FundHow much do you have saved? Enough for 3 months or 6 months? How does that compare to your monthly expenses?Generally, it’s good practice to have three to six months of cash saved for emergencies. Job loss, medical issues, major problems around the house. Having money saved up makes things easier. It takes some of the stress out of the situation. While no one wants to have a hugely expected emergency, it sure does make is less stressful when you have the money to cover the cost and not have to stress about making ends meet.But how you define three to six months of savings in good times could mean you have more money to stretch when that emergency arises. If that savings was based on a bloated budget, you may have space to cut back for a while and stretch your savings even further.Get clear on what you have, where it is, and when and how you can tap it if you need it.
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If You Don’t Have An Emergency Fund
First off, remember to connect with your mindset and give yourself grace. You can’t go back and change the past, saving up months or years ago. But you do still have options now.If your job situation remains stable, even just for now, review ways you can save in the upcoming weeks. Start setting aside any money you can to build even a small emergency fund. Most importantly, try to be the best employee you can be over the next several weeks. Try to put money aside every paycheck because at the moment, we are not sure how much longer this will ensue. It’s understandable to want to take your foot off the gas, especially if you’re working at home with kids, but if your company has to make layoffs, it’s crucial to put yourself in the best position possible.If you’re already facing job layoffs, first understand your options.
2. Review Your Budget & Make Necessary Cuts Now more than ever it’s important to know where your money is going. How much do you really spend each month? Are there expenses you can cut? Budgeting, for many people, brings up feelings of scarcity. It seems like the opposite of fun. But it doesn’t have to be that way. Being intentional with your spending now can mean you preserve cash for the things that are truly important to you. Instead of overspending on non-essentials now and having to make major changes later.Review your last two to three months of spending to know exactly what you spend. (Humans are terrible estimators, especially when it comes to calories and spending.) Then, start tracking your expenses so you’re mindful of your cash flow and your choices.
Ways To Reduce Your Spending
Understand Your Spending Triggers: What makes you spend money? Is it being on your Amazon app at 11 PM, laying in bed? Take your credit card information off the app. Is it heading out and hitting the drive through when you just need to get out of the house? Go for a walk around the block instead.Meal Plan: Especially a time when we’re practicing social distancing and don’t want to make multiple trips to the grocery store, meal planning can be key to keeping us healthy and cutting our food budgets.
3. Be A Steady, Savvy Investor
Most people are torn with two huge investor questions right now“Should I stop investing or sell my investments now?”and“Is now a good time to invest?”It has been over 10 years since we saw a true bear market. And volatility of this magnitude is significant, even in the context of historical downturns. But that doesn’t mean your strategy needs to change.For most investors who are far from retirement and have decent emergency funds, not much should change. Volatility makes us want to do something, change something. Yet, often, the best thing you can do it stay steady. Investing might be the one place where putting blinders on and doing nothing is the best advice we can give.Review your goals and understand your risk tolerance. You may want to re-balance your portfolio if your proportion of stocks or bonds has gotten out of whack. But then keep making the same consistent investments as you had been making.If you are feeling financially stable, have sufficient cash savings, and have the budget to increase your monthly investments a bit, go for it. Prices are lower than they were six-months ago and while no one can tell you where the bottom is, increasing your regular monthly investments is highly unlikely to hurt you long-term.But don’t stop investing. Don’t try to be a fortune teller and time the market. And don’t make major changes to your investment plan out of panic. Get back to basics and focus on your long-term goals.
4. Have a Complete Emergency & Estate Plan
This is not a commentary on COVID-19 or what may happen to you personally. Hopefully, you stay healthy. And if you get sick, you’ll likely make a full recovery. But emergency and estate planning isn’t an optional part of smart financial planning. It’s just one many of us put off as too morbid or something to deal with “later.”Unfortunately, many people don’t realize it’s importance until they’ve seen a loved one go through a difficult time where someone didn’t plan. Or when they see a health crisis like we’re facing now. Thinking about your family’s emergency and estate plan is truly an act of love. It’s a chance to reduce chaos, stress, expense and uncertainty for your family during a difficult and emotionally charged time, whether you’re temporarily separated, incapacitated, or pass away.This planning is especially crucial if you have kids. Getting these documents organized will allow for the smoothest transition possible for them, if another caregiver needs to step in. In times like these, we need to take advantage of worst-case-scenarios being top of mind and make sure our affairs are in order for our families. Effective Emergency & Estate PlanSufficient Life Insurance: How much life insurance coverage do you have? What would it cover? Do you just have a policy to cover burial costs and a few months of expenses for your spouse, or do you want to cover childcare or college costs for your kids? Make sure you have enough coverage and your beneficiary knows what it is meant to cover.Long-Term Disability Insurance: The U.S. Census Bureau estimates you have a 1 in 5 chance of becoming disabled at some point in your career. And the most common causes aren’t workplace injury, but health issues. If your company offers long-term disability coverage, make sure you know how much it covers and that you are opted in. Otherwise, get a quote for your own policy or create a plan for how you would handle 6-month or greater periods out of the workforce.Updated Will or Trust: If you have no kids and minimal assets, you may not need a will. But if you want a say in where your assets – and your children – go after your passing, it’s important you have a will. And that it’s up to date. If you don’t have a will, you can use online services like a free will from Tomorrow.me or more customized, guided services like Trust & Will. However, if you have a large estate (including life insurance), a blended family, or own a business it is important to work with an estate attorney to make sure your will or trust accurately reflects your wishes.Family Emergency Binder: A life insurance policy and a will can give your loved ones sufficient assets to navigate your loss. But it won’t tell your spouse or next-of-kin how to pay your power bill. Or log into your phone. Or who your child’s doctor or best friend is. A complete Family Emergency Binder will organize all the necessary information both to make things easy for you to access day-to-day, but also for your family to handle things without you.Organizing these documents is often something we say we just don’t have time for. We avoid it. Use this opportunity to complete your plans and give yourself the mental peace that things are handled.