We're not out of the woods yet with COVID-19, and the need for sound financial planning as clear as it's ever been. The news is telling us that the "second wave" is here. As the virus continues to spread throughout the world, we all continue adjusting to lifestyle changes in an effort to control the spread. Even though there are a lot of complex factors we cannot control, practicing social distancing and creating new routines to remain physically and psychologically healthy are actions we can take through the pandemic.
Practically every part of our lives has been affected by the coronavirus pandemic, including the economy. While we cannot control the fact that businesses have temporarily closed, temporarily re-opened, and the market is volatile, we can control our personal finances – by adjusting our spending or simply being more thoughtful about our spending decisions. Sometimes it's reviewing the basics or remembering the little things that can make the biggest impact.
So, how should you manage your money under these unique circumstances? Here are 5 financial planning tips to guide you:
1. Be Objective and Focus on Your Personal Economy
With the market in flux, you may be tempted to “protect” your money by selling stocks or switching to different investments. However, one fact that remains constant with regard to the market is that the market will go up, and it will go down. Don't forget that your investment plan was originally setup to fulfill long-term goals, not short-term gains, which means that emotionally driven investment decisions can be counterproductive, even financially harmful. If you’re feeling uncertain or anxious, that's understandable. You're not alone. That's why it’s always a good idea to chat with your financial advisor to make sure any moves you may be considering are in line with your ultimate long-term well-being.
Rather than focusing too closely on the overall market – and on factors that we cannot control – try shifting your mindset to your own personal economy. This can include aspects of your financial life such as your budget and your savings, which we’ll discuss more below.
2. Review Your Emergency Savings Fund
The purpose of an emergency fund or savings account is to help you face unexpected circumstances, such as an accident, loss of income, or a major home repair. These savings can be useful in dealing with both small and large unplanned expenses that come up and are not part of your usual bills and spending.1
Whether you are currently confronting a dire financial situation as a result of COVID-19 or not, it’s a good idea to have adequate savings put away, or begin building a robust fund if you don’t already have one. During a global emergency, especially one that has the ability to affect every person's health or job status, the risk of the unexpected is higher than usual. Making sure you and your family have enough in case of an emergency is one way to be proactive about staying prepared.
3. Be Aware of Scams
Scammers are attempting to capitalize on fears arising as a result of the coronavirus pandemic. You may have already seen scams that include vaccination offers, home test kits, and other products that promise to treat or prevent the virus. Other scams attempt to capitalize on the fact that so many people are now working from home, and try to push remote work schemes.2 Sophisticated scammers can disguise their offers as though they are provided by notable organizations, such as the World Health Organization, in an attempt to steal money or sensitive information.3 These various scams can come from robocalls or online offers. The Federal Trade Commission suggests hanging up on robocalls, ignoring online attempts, and fact-checking before sharing information related to COVID-19. 2
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4. Revisit Your Budget
Even if your employment status hasn't changed and your income remains steady, think about reviewing your budget, cutting unnecessary expenses, and taking advantage of any extra money leftover each month. With fewer restaurants, bars and stores to visit, you might find that you have more disposable income. Consider increasing your retirement fund contributions or adding to your emergency savings fund. Plus, if you're in a financial position to help, consider exploring donation options to provide assistance, such as donating to food banks or groups supporting hospitals and health facilities.
5. Keep Informed Regarding Available Resources
In response to COVID-19, governments have passed packages in support of families, individuals and businesses. In the United States, the CARES Act includes extended unemployment benefits, healthcare aid, and one-time stimulus checks for individuals with adjusted gross incomes up to $75,000 (single), $150,000 (joint), or $112,500 (heads of household).4 In Canada, the economic response plan includes multiple checks for qualifying individuals, a zero interest rate for federal student loans, and an extended tax filing deadline of July 15, which the United States is offering as well.5 So just in case you or someone you know qualifies for or is in need of assistance, stay up-to-date by reviewing your government’s official resources for information.
As we cautiously recover from this global emergency, there are steps you can take to remain both physically healthy and financially prepared. If you have concerns about investment options, building an emergency fund, or government resources, reach out to your financial advisor, your workplace, or a qualified professional to better understand these options and benefits.