If you’ve been following our blog for a while, perhaps you already resolved to Make 2020 to Year of Financial Wisdom.
Last year, we took on common financial myths and laid out some basic principles for getting your finances in order.
Of course, 2020 isn’t shaping up to be the year that most of us were expecting.
So what does that mean for your finances? With a pandemic raging, can 2020 still be the year of financial wisdom?
Financial planning may have changed somewhat since the start of the pandemic (we’ll get into that), but basic principles of financial health like paying off debt and getting organized haven’t changed at all. If anything, they’re more important than ever.
Read on for more information.
What Has Stayed The Same
Many of the tips that we shared last year remain relevant to financial planning during coronavirus.
Have you ever had to open up a bank account specifically to get an auto loan? Maybe you change jobs frequently, and each of your employers has contributed to a retirement account at a different institution? Or maybe you have a few credit cards you never use any more?
Getting all of these documents in order—knowing what you have, what you owe, and where everything is—can take a lot of the stress out of financial planning. In stressful times, anything you can do to lighten your mental load is a good idea. Maybe you’ll be like my clients who found an account containing thirty-four thousand dollars that they didn’t know they had. It’s definitely worth taking a look!
Pay off high-interest debts.
“Credit card debt.” You, know that thing everybody always says you shouldn’t have? Sounds scary, right?
Well, there is a good reason that we regard credit card debt as something to avoid—credit card interest rates can be as high as 25%. This means that unless you pay your full credit card bill off every month, you’re making your credit card company rich. This is true even if you always make your minimum payment.
To make yourself rich instead, figure out what the interest rates are on your outstanding debts and pay the most expensive ones down first. If you are unsure how to proceed with this, a financial advisor can help.
Consult a professional about windfalls.
The circumstances under which most of us inherit money don’t lend themselves to decision-making. If you inherit money when a loved one passes, quickly becoming an expert in both investment banking and estate law is unlikely to be at the top of your list. A financial advisor can help you make smart decisions about funds that come your way.
What Has Changed?
So has anything changed? Well, consulting a financial professional matters even more than it did before. (And checking in on your savings wouldn’t hurt, either!)
Consider an advisor.
Okay—this one isn’t new. Working with a financial advisor has always been a good option for people working towards financial wisdom.
What is new is the level of uncertainty people feel right now. You might not feel able to plan for the future right now when things are changing so quickly, but financial advisors have seen it all before. They’re also engaged in sophisticated modeling and understand the financial needs that people face at different stages of life.
For example, somebody getting ready to retire has a different set of concerns that somebody looking for his or her first job. A financial advisor can help you navigate your questions, no matter where you’re at or how turbulent the markets are.
Build an emergency fund.
It’s always a good idea to have enough cash on hand to cover your basic living expenses for three months.
If you haven’t set yourself this challenge before, now is a great time to give it a shot: calculate what need to support yourself for a month, multiply by three, and put aside regularly for that goal. You’ll sleep more easily knowing you’re prepared to handle bumps in the road.
Be calm—and be open to advantages.
Another reason to work with a financial advisor during an economic downturn is that they will be attuned to circumstances that could benefit you. For example, if you’ve been considering refinancing your home, 2020’s historically low-interest rates might work in your favor.
Ultimately, knowing that you have a financial professional by your side will help you remain calm and focused on what matters: your health, your safety, and your family’s financial future.
We might not be able to control everything, but a good advisor can put you in a strong position for whatever the rest of 2020 brings.
Want to learn more about how to make the most of this year and get ready for the next? Get in touch!