Planning for the future has always been important, but as the Coronavirus pandemic continues to change life as we know it, a financial plan has become a higher priority for a lot of people. Knowing where to start can be confusing, so we’ve created a comprehensive financial planning checklist specifically for today’s environment – the dos and don’ts of personal finance in emergencies.
When making a comprehensive financial planning checklist, it’s important to review what you should be doing as well as what not to do with your money in times of crisis. Both steps can be just as crucial.
Daily life has been heavily affected by panic from the Coronavirus. Still, prudence and good decision making are critical during this pandemic and any other crises going forward. These are the dos and don’ts of personal finance during an emergency, to help you keep your finances intact during the Coronavirus pandemic and any other troubling time.
Do: Create a Basic Financial Plan for the Coronavirus Crisis
Emergency situations, whether they are caused by internal or external situations, call for a specific plan that is different from normal procedures. Just as oil and gas operators have dedicated protocol in their Emergency Response Plans (ERPs), your personal finances should as well. Today, the Coronavirus pandemic has created a new normal for Americans. Much of the population must address the pandemic and adjust their financial activities to fit the current crisis.
Your financial plan should consist of spending on essentials like housing, food, utilities and supplies, and account for discretionary services you can cancel or put on hold. If you have any excess funds for spending, consider setting it aside in your savings or even allocating a portion of it to your retirement portfolio if you’re still working. This can help you cover your basic needs while potentially benefiting from fluctuations in the stock market.
Don’t: Improvise Your Finances (Unless You Have To)
There is nothing wrong with thinking on your feet. But, in the midst of a crisis, it’s wise to operate with a plan.
For example, if you know that your company may go through layoffs or furloughs, you can predetermine how much of your savings are needed to cover your mortgage and high-priority bills, and for how long. Additionally, you can get ahead of any large automated purchases, such as property taxes or insurance premiums, and plan your spending for that period accordingly if you can.
Without a crisis plan, you risk causing more harm to your finances by rushing your financial decisions and not thinking ahead, or risk being blindsided by a big expense. If possible, only improvise your financial decisions if you have to. And discuss your plan with a financial advisor you trust before making any changes. A financial advisor can help you plan for emergencies, making this process easier.
Do: Use Your Consumer Relief Resources
Even if the virus is contained sooner than later, many folks in Texas will still experience some financial challenges after the state of emergency ends. To protect yourself, look into the available economic resources to see what you qualify for and consider using them before going into debt.
For starters, contact your regular service providers to see if they are offering any bill-pay relief arrangements. It’s possible that your regular payments for your mortgage, utilities, credit cards or other bills can be postponed, depending on your situation. For example, a provision of the Coronavirus Aid, Relief and Economic Security (CARES) Act provides 60 days of foreclosure protection for homeowners and potential forbearance due to financial hardship. This relief can provide you the chance to boost your savings.
After you’ve checked your non-government resources, look deeper into the federal or state programs you qualify for. Though this may seem obvious, many people aren’t aware of the relief programs available to them – and others are unsure if they qualify. Federal programs like the CARES Act can potentially provide $600 extra a week in unemployment assistance if you’re laid-off, had your hours reduced or are at risk of the virus in the workplace.
Also, double-check the resources that are available to you as a taxpayer. It can make a difference in your financial picture. If you’re not sure where to start, talk with your financial advisor.
Don’t: Overspend as Texas Reopens
As the country starts to reopen, it’s important to tread lightly with new spending and borrowing. If another Coronavirus-related crisis occurs, due to a new strain or ensuing recession, there’s a chance that citizens in San Antonio, New Braunfels and other surrounding cities in Texas will endure more economic strain. Keep a handle on your spending and borrowing to overcome both the pandemic and its economic aftermath.
Do: Prioritize Investing Over Trading
The market’s recent decline has many investors looking to buy stocks at a potential “discount.” While enticing, many stocks are down for a reason, due to future projections of losses and reductions in earnings.
Looking for investment opportunities isn’t a bad idea, but it’s ideal to prioritize your long-term investing over trading. To do this, utilize the bulk of your assets to follow your financial plan, and then allocate a smaller portion of your assets for exploratory trades.
Again, we recommend discussing your specific situation with a financial advisor you trust before making any changes that can affect your future.
Don’t: Follow the Herd when Investing
It is common for everyday investors to follow stock tips without completing due diligence. During a crisis, many are looking for “hot” stocks to purchase and to turn a quick profit. But often times, the masses of investors who attempt to time the market, buy only after a stock is popular and sell during panic. If you follow the herd, you may inadvertently buy high and sell low, the exact opposite of good investing.
Do: If You’re a Small Business Owner, Strategize Your Credit and Any Stimulus Loans
Small business has been dealt an extremely difficult hand in this pandemic, all while needing to solve a calculus problem involving layoffs, reduced hours, paycheck protection, new loans and a slow reopening process. Nevertheless, the CARES Act can be used strategically. While every business is different, the timing and nature of your funding requirements strongly determines what’s best for you.
If you have smaller, short-term business expenses to make, consider using your corporate credit card, which can qualify for zero-interest promotions and special benefits during this crisis.
If you have less than 500 employees, look into Economic Injury Disaster Loans (EIDLs). These loans are designed to cover lost revenue and offer an advance of $10,000 that does not need to be repaid. Also, these grants can be specifically earmarked for payroll, your office’s rent and repaying obligations. Use these to your advantage.
If you need to make a larger capital expense that can offer a long-term benefit, such as a large machine, consider using other forms of loans, as it can operate as an asset and depreciable expense for your business.
Don’t: Give Up
As you’ve probably heard a million times, the current climate is unprecedented. Knowing this, it’s important to harness your relationship with your financial advisor if you have one, while staying optimistic and prudent. Considering how difficult the times are now, you can draw from your experience enduring the Great Recession and other difficult markets.
Using this comprehensive financial planning checklist and relying on strategy, planning and sound financial decisions can help you navigate through these times.
If you’re looking for a financial advisor in the San Antonio area or want a second opinion on your current financial plan, contact us. We’re here for you.
This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.