Protecting Your Finances During Quarantine
Originally published on Redfin on April 15, 2020 - By Mike Cahill
Many of us find ourselves thinking about financial stability on a day-to-day basis. Given the current situation and the economic uncertainty we're now facing, this subject seems more top-of-mind than ever. While none of us knows what the future holds, we can still take advantage of this opportunity to implement new saving strategies and strong financial habits - habits that you can carry with you long after this quarantine has ended. In an effort to provide you with some helpful COVID-19 saving tips, we reached out to financial experts from New York to San Diego. Read on for insights on protecting your finances in the current environment from the professionals themselves.
Hold onto your savings and keep an eye on your investments
SAVING: During times of crisis, you should evaluate your spending needs…be more conservative; right now is the perfect time for this! You probably aren’t spending as much since you can’t go to events or out to dinner. However, you must resist the urge to spend online for unnecessary items. Ask yourself, do I really need this purchase? Furthermore, now is a great time to reevaluate your Emergency/Comfort fund. Do you have enough money in the bank to give you peace of mind during times like this? I suggest the conservative approach of having 6 months’ worth of expenses saved.
INVESTING: If your portfolio sustained market losses, you should: 1) Don’t panic - trust the plan, if you have one. 2) Try not to take distributions from your investments. When you sell investments, you lock in those losses; when you take distributions, you not only lock in those losses, but you compound the loss (market loss + distribution)…use your comfort fund as an alternative for income needs. 3) Rebalance your portfolio 4) Remember how you feel. After the market and your investments recover, remember how you felt. If you were overly stressed out by your investment losses, then you need to restructure your portfolio to focus on your downside market risk. Behavioral Finance has proven investors make irrational decisions during market crisis and portfolio losses. This is why the average investor routinely underperforms the market. - Securus Financial
The first thing I’d suggest is separating savings dollars from investment dollars. Whatever you earmark for short-term savings should be in a place where ‘return’ isn’t an issue. Investment money can then be divided into intermediate-term and long-term money. If you have money to provide 3-5 years of cushion in intermediate bonds, you can put the rest into long-term investments, which usually means stocks, stock funds, and ETFs. This, for many, means less stock exposure, but also less downside risk. Your 401(k) is the best place for long-term growth; outside the 401(k), you’ll likely need more liquidity, even if it’s taxable. - Independent Financial Group
1) Remember why you are investing in the first place: Is your savings goal for a one-time event, or for a more complex solution like retirement that will provide financial options for the rest of your life? Market volatility like we’re experiencing now may provide pockets of opportunity in the long run. 2) Be mindful of the information you consume: Most news is negative, for negative information keeps up glued to the source. Limiting how often and the amount of time you get updated on the market is one of the best things you can do to keep yourself financially on track (and save your mental health). 3) Trust the plan: The US economy and corporate America have steered their way through world wars and cold wars, financial crises, and geopolitical events. Through even the most challenging times, markets have found their way back to normalcy, and investors have been able to look to the future. We believe this time will be no different. Stay the course – remember, there is no safe way to get off of a roller coaster early. We are all in this together! - Fulcrum Financial Group
While this is no doubt a difficult and dark time for our country, investors should be aware that our current market environment is ripe with investment opportunities. We must look beyond the horizon, and remind ourselves that with time, normality shall return. By holding our investments through negative market volatility, investing our current free cash flows, and rebalancing portfolios that are overweight in cash or fixed-income assets, we can strategically leverage the current market to likely benefit ourselves for the bright years that lie ahead. - Sentinel Financial
Needs vs. wants
The quarantine has forced us all to really focus on the difference between needs and wants. Keep that focus after this crisis has passed and you’ll be able to save a lot more money for wants in retirement. - Nelson Financial Planning
Your savings are already protected so long as you do not increase your spending habits online out of boredom or “sales” seeking. The biggest threat to one’s savings is their spending habits and being bored can un-knowingly shift those habits from contained to beyond the budget. Stay “active” by keeping your routine the same as if you were going to your job….get up, shower, breakfast, get ready and then “go to your basement or your office” and work the same as you would otherwise do. - Summit Financial
Take advantage of what you can
Use the low-interest rates brought upon by this pandemic to your advantage. If you are paying off high-interest credit cards or loans, consider consolidating or refinancing to save yourself some cash. If you were already thinking of buying a home or car, consider doing so now! - Wiser Advisor
One way to take advantage is on the expected real estate arbitrage that is about to happen. Look at refinancing your home with the current rates. Then lease out your home and purchase another home when the market resets. This way you get favorable lending as a residence of your new property and your current property that will be later changed as an investment property. Once complete you will have someone paying on an asset of yours that will ideally appreciate over time without much additional capital outlay on your part to create this asset. - Grubb Wealth
Families with young children should check in with their local schools to see if their meal programs are open to everyone or if the meal programs are needs-based because most are not. Every family has the sudden burden of planning 2-3 more meals for their kids, in addition to lesson-planning as newly-minted teachers, so they can reduce the mental and financial stress a bit by taking advantage of those meal programs if they’re available.
Families can also meal plan for a week, possibly two, in order to adopt or restore the routine for eating at home instead of dining out or ordering take-out and because it means less frequent trips to the grocery store. Given we are not able to not eat at restaurants, we can make the most of this unfortunate situation by instituting changes to our routines that will lead to savings that can be sustained for months and years to come. - Surevest Wealth Management
Have you considered reverse engineering? If you’re eligible for the stimulus, still employed and contributing to a retirement plan, why not increase your retirement plan contributions by the amount of government stimulus you receive. You’ll have the same amount to live off of, but you’ll be able to take this opportunity to increase your retirement plan savings – with government money! Or if you’re retired and eligible for the stimulus, you may take this opportunity to start saving for your children, or your grandchildren’s retirement. Open up a Roth IRA for a loved one (with earned income – or you can always employ them to assist with quarantine projects) and turn this unfortunate situation into a chance to help secure the next generation’s retirement. - JBL Financial
Cash is still king
Remember first and foremost in times like this cash is king! You still need to have emergency funds set aside, expect the unexpected. Put to paper an initial budget so you can more accurately access your short to intermediate-term financial needs. If your current resources fall short of your needs it's time to look at outside resources such as the availability of government subsidies and other forms of assistance. - Finley Wealth
Invest in yourself
Our human capital is often one of the most overlooked assets on our financial statements. Investing in yourself through education can be a great way to grow your wealth. Take an online class, learn a foreign language, learn about your finances, gain a new skill. All of these can add to your bottom line in a time when many may not be making money. Health is Wealth. Take the time to get into better physical shape. Walk or ride your bike. - Vawter Financial
Originally published on Redfin
Securities offered through Regulus Advisors, LLC. Member FINRA/SIPC. Investment advisory services offered through Regal Investment Advisors, LLC, an SEC Registered Investment Advisor. Registration with the SEC does not imply any level of skill or training. Regulus Advisors and Regal Investment Advisors are affiliated entities. Summit Retirement Advisors, LLC and Summit Financial Group of Indiana are affiliated entities. Summit Retirement Advisors, LLC and Summit Financial Group of Indiana are independent of Regulus Advisors and Regal Investment Advisors.