Atlanta Financial Blog

Financial Anchors Amidst a Viral Storm: Three Core Areas of Focus in Personal Finance During COVID-19

Financial Anchors Amidst a Viral Storm: Three Core Areas of Focus in Personal Finance During COVID-19

Charles Crowley, CFP®, AIF®
April 28, 2020

It has been nearly two months since the “shelter in place” restrictions required us all to adjust to a life in quarantine. There has been a swift and mandatory acceptance of personal and professional lives being mashed together, and the situation certainly requires some adjustments as we get used to what may very well prove to be a new norm of precaution and safety. As scary as the health side of the equation is, the financial fallout of COVID-19 has been an even tougher pill to swallow in many respects and many are asking the question, “What can I do right now to make sure my family will be ok financially?”

The most common questions as of late have been concerning the future of the financial markets and the American economy. Though there are many variables in play, our Atlanta Financial team has been reminding people that some things are beyond our control. We must focus on what we have direct influence over- our attitudes and our actions, especially as it relates to financial decisions in a period of volatility. Here are three key areas I’ve been encouraging people to refocus on during these very challenging times:

  1. Control your emotions and tune out the noise.

One of the worst things a person can do with their money is to allow their fear or excitement to drive their decisions. So, what can you do to keep a level head with your money right now?

  • Stay informed but be cautiously aware of the source of your news. Our homes are presently being flooded with information, and, unfortunately, much of the media platforms do have an agenda, bias or skew. Don’t get caught up in even mild sensationalism. Listen to different perspectives, consider the concepts through varying lenses (i.e. financial, political, healthcare, etc.), and fact check what you hear or read.
  • Lean on your advisor for objectivity. These are individuals that you trust, and that possess the professional capacity to help you decipher information. They understand the historical context of what is happening and can refocus a temporary fear on a longer-term assurance.
  1. Solidify your baseline fundamentals.

The pillars of personal finance that will help control emotions and securely weather times that could be challenging financially are proper cash cushions and responsible budgeting.

  • Revisiting your cash reserves will help you to control the emotions because you know you have “proper margin” via adequate emergency and contingency funds.
    • Contingency funds: ensure that you have all applicable deductibles covered in cash and readily available. This would nearly guarantee that you have enough cash in the bank at any given time to meet an unexpected expense of $1,000 or less.
    • Work to fully fund your longer-term emergency fund.
      • A good rule of thumb is 3 to 6 months’ worth of expenses if are working, but note that this is subjective and depends on whether you are a one- or two-income family.
      • In retirement, our team often says 6 to 12 months’ worth of cash is appropriate and that is primarily so that you are not having to disturb portfolio investments at inopportune times.
    • Proactively revisit your budget and tighten the belt. As always  with budgeting, it is all about the intentionality and here are a few concepts to consider as you do so:
      • Evaluate your “bare-bones” cashflow and defer the non-essential spending where possible. What are the things that must be covered for the family? That is your bare-bones budget and will include the basics of food, shelter, utilities, life essentials, and transportation.
      • Look for ways to cut expenses through negotiation if you aren’t willing to give them up. There are many expenditures that you may be able to adjust for a better cashflow position just by picking up the phone. Utilities, entertainment and communications packages, gym and club memberships, home/yard maintenance programs… just a few examples of areas where these options may be available just by calling and asking the right questions.
      • Build in some room for things you enjoy. We all need a little bit of positivity right now, so leave room for things that bring you and your family joy!
  1. Be opportunistic where possible, but don’t sacrifice obligation for opportunity.
    • Addressing punitive, high interest consumer debt is necessary, but needs to be carefully considered if it will significantly impact your cash cushion. Think ahead!
    • With interest rates being pushed nearly to zero, many are looking to refinance various debts to historically low rates. Consider the positive, long-term cashflow impact this might have but understand there may be upfront costs that will impact your cash cushion as well.
    • The markets are assuredly presenting more attractive entry points if you have cash on the sideline. However, amidst economic uncertainty and unprecedented volatility, consider a measured dollar cost averaging strategy to invest the money over time.

These are certainly unusual times, and a renewed focus on the basics we can control is a necessary task to weather the current circumstances. Our Atlanta Financial, FIT™ Perspectives Podcast team will be diving deeper into how to personally navigate the COVID 19 situation financially on an upcoming episode. So be on the lookout for it in the coming weeks by following us on social media and subscribing to our show for new release updates. In the interim, if you are wondering how your financial situation has been impacted by the virus fallout, then reach out to our Atlanta Financial wealth management team at [email protected].

 

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