As COVID-19 continues to spread throughout the globe, individuals are adjusting to new lifestyles in an effort to curb the spread.
Virtually every part of our lives has been affected by the pandemic, including the economy. While we cannot control the fact that businesses are temporarily closed and the market is volatile, we can control our personal finances - adjusting spending or simply being more mindful during these unsteady times.
So, how should you mange your money during this pandemic and economic uncertainty? Here are five tips:
Tip #1: Remain Objective & Focus on Your Personal Economy
With the market in flux, it can feel tempting to make moves to “protect” your money by selling stocks or switching to different investments. However, if there is one fact that remains constant with regard to the market, it’s this: the market will go up, and it will go down. Remembering that your investment plan was setup to fulfill long-term goals, not short-term gains, can be helpful to avoid succumbing to an emotionally driven investment decision. If you’re feeling uncertain or anxious, it’s always a good idea to chat with your financial advisor to make sure any decisions are in line with your ultimate long-term well-being.
Rather than overly focusing on the market at large — and on factors that we cannot control — try shifting your mindset to your own personal economy. This can include components of your financial life such as your budget and your savings, which we’ll discuss more below.
Tip #2: Review Your Emergency Savings Fund
An emergency fund is intended to help in the face of unexpected circumstances, such as an accident, loss of income, or a home repair. These savings can assist in both small and large unplanned expenses that come up and are not part of your usual bills and spending.1
Whether or not you are currently confronting a dire financial situation as a result of COVID-19, it’s a good idea to make sure you have adequate savings, or begin building a robust fund if you don’t already have one. In the context of a global emergency, especially one that has the capacity to affect every individual’s health or job status, the risk of the unexpected is higher than usual. Making sure you and your family would have enough in case of an emergency is one way to stay proactive and prepared.
Tip #3: Be Aware of Scams
Many scammers are attempting to capitalize on fears arising as a result of the coronavirus. Scams include vaccination offers, home test kits and other products to treat or prevent the virus. Other scams capitalize on the fact that so many individuals are now working from home, and try to push remote work schemes.2 Sophisticated scammers can disguise as 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 Remember, the IRS will never call you for your banking information so if you do get a call either to get your information for your stimulus check or saying that you owe back taxes and you will be arrested, HANG UP immediately and do not share any information.
Tip #4: Review Your Budget
Even if your job status has not changed and your income remains steady, consider reviewing your budget, cutting unnecessary costs and taking advantage of extra money leftover each month. The lack of restaurants, bars and stores to visit may mean you now have greater disposable income. You might consider increasing your retirement fund contributions or adding to your emergency savings fund.
Additionally, if you have the means, consider exploring donation options to provide assistance and help others, such as food banks or groups supporting hospitals and health facilities. Part of the recent CARES Act includes a charitable tax deduction of $300 for each taxpayer for 2020, even if you take the standard deduction. So, save those receipts if you donate!
Tip #5: Stay Informed Regarding Available Resources
In response to COVID-19, governments are passing packages to support 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 The tax filing deadline has been extended to July 15.
As we collectively confront this global emergency, you can take steps to remain both physically healthy and financially prepared. If you have concerns about investments, building an emergency fund or government resources, reach out to your financial advisor, your workplace or a qualified professional to better understand your options and benefits.
Investment advisor representative of and investment advisory services offered through Garrett Investment Advisors, LLC, a fee-only SEC registered investment advisor. Tel: (910) FEE-ONLY. Synergy Financial Planning may offer investment advisory services in the State of Connecticut and in other jurisdictions where exempted.
Investing involves substantial risk and has the potential for partial or complete loss of funds invested. Investments mentioned may not be suitable for all investors. Before investing in any investment product, potential investors should consult their financial or tax advisor, accountant, or attorney with regard to their specific situation.