Spring is the perfect time to take stock of your financial situation and make sure that everything is in order. And in the wake of COVID-19 and the devastation that social distancing is wreaking on many people’s finances, a midyear financial review is more important than ever.
Even if you have been diligently saving for retirement and squirreling away money in an emergency fund for years, it is highly unlikely that the coronavirus and the market turbulence it has created have not taken a toll on your overall savings. Now is the perfect time to review your finances and to see exactly where you stand and if there are any changes you should be making.
The first step is getting an overall view–from the money in your checking and savings accounts, to what you have saved for retirement, any outstanding loans, your credit cards and any other debts. Once you have a good idea of where you stand, consider making a budget, or perhaps revising your existing budget if you already have one. Amidst such uncertainty, it is good to know exactly what your monthly expenses are right now and how much you can actually expect to save.
If you don’t yet have an emergency fund, there is no better time to start one. The coronavirus has driven home the importance of having cash on hand for unexpected crises. Financial advisors suggest that people keep the equivalent of six months’ worth of expenses in cash that can be accessed easily, but separate from your other accounts and where you are less likely to tap it for unnecessary expenses. If you don’t yet have an emergency fund, that is a key goal to include in any budget you make.
Your retirement savings is another important area to focus on. While it may seem counterintuitive to pour more money into the stock market, what with stocks being hard hit by the coronavirus and the need to shut down so many businesses, now is actually a good time to invest any extra money you may have. That’s because buying low is ideal, so as long as you are investing in businesses that are ultimately expected to weather the current situation. Investing for the long-term could pay off substantially once the pandemic is over and stocks begin to rise. Stepping up the amount you invest in tax-advantaged investment vehicles could also help to lower your overall tax bill at the end of the year.
The coronavirus highlights the importance of estate planning and having a will that clearly identifies where your assets should go once you are no longer around. Hopefully you’ve already got a will in place but, if not, now is the time to do so. In conjunction with your estate planning, now is also a good time to review your life insurance and any long-term care policies that you may have –both to make sure you have adequate coverage to meet your needs and to see if there are alternative insurance options that may provide you with equal coverage at a better price.