If you had asked me a couple months ago what my plans were for the month of April, my response probably would have included things like travelling, going to concerts, and visiting friends and family. As you might imagine, I am unfortunately doing exactly zero of those things (in person, anyway), thanks to the global pandemic that continues to wreak havoc on the world. However, I consider myself quite fortunate to have the ability to work from home and continue earning a paycheck, as I understand many are not so fortunate. If you are in a similar position and have not had your income reduced a significant amount—or lost entirely—due to the coronavirus, this quarantine likely produced a unique opportunity for you financially in some capacity. Below are some ways you can take advantage of that opportunity.
Review Your Budget
Everyone needs a budget of some kind. It is an essential component of managing your personal finances. Without—at the very least—a general understanding of how much money is coming in versus going out, you run the risk of living outside your means. This risk can be further compounded if you use credit cards to pay for things. Viewed another way, reviewing—or creating—your budget may reveal you don’t spend as much as you think. If that’s the case, you will find you can put more of your income towards a more productive use, such as paying down debt or saving for your future (more on those below).
Review Your Insurance Policies
Homeowners. Renters. Life. Auto. Health. Umbrella. Long-Term Care. Disability. Each of these types of insurance policies can have their place in a financial plan, but that doesn’t mean you should buy a policy and never look at it again. In fact, most financial planners suggest reviewing your insurance policies and comparing available alternatives at least annually. You may find comparable or identical coverage for a lower cost, or you may even find you no longer need a particular insurance policy at all!
Donate to Charity
If there was ever a time in recent history to reach out and help your fellow human, that time is now. With unemployment numbers continuing to rise as the coronavirus pandemic continues to cause uncertainty in the economy, it is likely you know (or know of) someone who has been negatively impacted financially in this unprecedented time. Even if you don’t personally know someone, there are plenty of food banks and other organizations graciously accepting donations to help those who are struggling.
Unfortunately, while all acts of charity are helpful and noble, not all of them can be quantified and itemized on your tax return. So, while your donation can come in many forms—from helping an elderly neighbor get their groceries to donating a portion of your stimulus check to a worthy charity—make sure you give a monetary contribution to a qualified charity if you want to receive a financial benefit from it. Additionally, the recently enacted CARES Act allows taxpayers who claim the standard deduction to take a $300 “above-the-line” deduction for cash donations made to charity this year.
Pay Down Debt
As you might find by reviewing or creating your budget, there’s likely a portion of your income that is going towards paying down some form of debt (e.g. car loan, student loan, mortgage, credit card, etc.). Increasing the amount or frequency of payments you are making towards those debts shortens the life of those loans, decreasing the total amount you spend on interest and potentially freeing up cash flow that can be used for other financially productive decisions. For example, you could…
Contribute to Your Retirement Account(s)
To be clear, this does not mean now is the absolute best time to make a deposit into your retirement accounts. In fact, because the market is so volatile at this time, you may make a deposit and see the value immediately drop. However, when it comes to putting away money for retirement, there is almost never a “bad” time to do so. Additionally, as some employers are cutting matching contributions to employee retirement plans, now may be an especially prudent time to make a contribution.
Speak with a Financial Advisor
Events like this global pandemic can cause a lot of stress, anxiety, and panic. Whether you currently work with a financial advisor or not, you may be experiencing similar feelings regarding your personal finances. While it is natural to have these feelings at times like this, you can use them as motivators to reach out to qualified advisors who can suggest potential ways to address those (hopefully) short-term concerns and meet your long-term financial goals.
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The information presented in this article is for educational purposes only and is not meant to provide individual advice to the reader. There is no guarantee the information provided above relates to your personal situation. All financial situations are unique and should be advised as such.