Atlanta Financial Blog

Things You Can Do to Enhance Your Financial Situation Now

10 Things You Can Do to Enhance Your Financial Situation Now

Julianne F. Andrews, MBA, CFP®, AIF®
April 6, 2020

Today, we are in the midst of an unprecedented global event that has had a dramatic effect on both our financial and personal lives.  Much is in the news about what we can do to care for our health and the well being of our neighbors and loved ones.  As events unfold, it can be easy to feel that we do not have control over things we once perhaps took for granted: our money and our health.  But there are some things that each of us can do now to take some control back on the financial front.

Here are 10 things from Atlanta Financial that you can consider to improve your financial life now:

#1 – First and foremost, tune out the noise. 
There is valuable information everywhere we look about updates on the fight against COVID-19.  It is certainly important to stay informed and understand what you need to do to keep you and your family safe.  However, a 24/7 dose of this can be overwhelming and undermining.  It is important to limit what you are listening to both in terms of content and tone.  Get the facts and then turn to a favorite hobby, take a walk with your dog or go out for a run.  Do something that you know has energized you in the past.  Something that allows you to clear your mind and get back to an even keel.
#2 – Focus on the long term. 
Accept that a “return to normal” will take time.  As frustrating as it is, we do not know how much “time” that will be. However, we have worked with each of our clients to build a long-term plan that is designed for their unique situation and built to withstand economic shocks such as the one we are now experiencing.  Our diversified portfolios are designed for the long-term and require patience and discipline.  Both are being tested mightily now but since Atlanta Financial was founded in 1992, we have been through many financial upheavals (tech wreck, 9/11, financial crisis). Take confidence in the fact that eventually we will pass through this.
#3 – Maintain an adequate cash buffer. 
Having an adequate cash buffer (cash in the bank, CD’s, etc.) will allow you to stay the course as the uncertainty in the financial markets plays out.  A general rule of thumb is to have 3 – 6 months of living expenses liquid if you are working and 6 – 12 months if you are retired.  If you do not have this kind of liquidity, you may be able to build it up now as we all “shelter in place.”  Unfortunately, we cannot go out to dinner, meet up with friends, go to movies, travel or do many of the things we enjoy doing.  Since these entertainment and travel dollars are now not being spent, you may find that your cash is building.  That is fine and may in fact give you some peace of mind.
#4 – If you are retired and receiving a monthly distribution, review your bank balance to see if it is building and let us know. 
You may have been setting aside funds for a trip that is now indefinitely postponed or may just have lower expenses because of the “stay at home” orders. If your cash is building, please give us a call.  It may be possible to reduce your monthly distributions on an interim basis which will allow your portfolio to recover more quickly when the inevitable market recovery occurs.
#5 – Review your supplemental sources of liquidity. 
If you feel that you do not have enough liquidity available in the bank, review your supplemental sources of liquidity that can be used on a temporary basis when needed.  For an individual, this would typically be a home equity line of credit.  We are not suggesting pulling down debt unnecessarily here.  We are however suggesting reviewing your situation to make sure you have resources like this available should they be needed if you feel your cash reserves are insufficient.  If you do not have a home equity line of credit and feel you may need one, a call to your bank or mortgage holder would be wise to see what would be involved with putting one in place.  Generally closing costs on these are fairly low.  If you are a small business owner, review your business lines of credit to ensure they are adequate should a temporary cash shortfall occur.  Also, if your business has been impacted by COVID-19, make sure you are taking full advantage of all programs offered under the CARES Act to help with cash flow.  A call to your banker to review your credit lines and your eligibility for programs under the CARES Act would be wise.
#6 – Consider refinancing your mortgage. 
Interest rates are at relative lows right now.  It may be possible to refinance your mortgage to reduce your monthly payment or conversely refinance to a shorter term so that your home will be paid off faster.  Before you pursue a potential refinance, give our office a call to discuss whether this might make sense for you.  And, when you receive good faith estimates for refinancing your home, make sure to run them by us.  We can help you sort through which option makes the most sense for you.
#7 – If you owe taxes for 2019, delay filing until July 15 this year.
Because of the COVID-19 outbreak, Uncle Sam has extended the tax filing deadline for 2019 to July 15, 2020.  This deadline applies to filing your taxes, paying your taxes and funding IRA’s. That means that you can push out these expenses for three more months.  Of course, if you are getting a refund, go ahead and file now (unless your 2019 income will disqualify you for a recovery rebate check under the CARES Act).
#8 – If you have been taking required minimum distributions from your retirement account, let your CPA know that your taxable income may be lower for 2020.
Part of the recently passed CARES Act suspended required minimum distributions for 2020.  If you have already taken your 2020 minimum distribution, you may still be able to roll it back into your IRA account (to avoid paying taxes in 2020).  However, if you have not taken your required distribution for this year, you do not need to do so which will reduce your taxable income for 2020.  This may allow you to reduce your quarterly estimated payments for 2020. Contact our office and your CPA to discuss.
#9 – Consider a Roth conversion this year. 
Roth conversions can make financial sense in a variety of circumstances, but 2020 could be a particularly good time to employ this strategy.  When you convert an IRA (or a portion of one) to a Roth IRA, you pay taxes on the amount converted.  However, with the market at depressed levels, now could be a good time to do this conversion (on a lower market value) which will reduce the taxes due. Contact our office to discuss this strategy and we will be happy to coordinate this with your CPA.
#10 – Call us! 
As financial advisors, we are a resource and not a daily news source. We are keeping a watchful eye on the equity markets and economic conditions.  Our goal is to look at today’s uncertain conditions and to offer long-term solutions and strategies that consider today’s headlines but focus on our client’s long-term goals.

We know this is a difficult journey and we are all in this together.  We stand ready to talk to you about deploying any of the strategies here or any other questions you may have.

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