By now, you are seeing the effects COVID-19, or coronavirus, is having on our economy and financial markets. Many industries will continue to be impacted for some time because of social distancing and recent restrictions. When it feels like so many things are out of our control, the best thing to do is focus on the things that are.
- Continue building your emergency fund and short-term savings: We generally recommend 6-12 months of living expenses in an emergency fund as a way to prepare for uncertain times like this. In addition, we recommend keeping short term savings for anticipated expenses in the next 3-5 years. We recommend keeping these funds in cash (using a high yield savings account).
- Keep expenses under control: If you feel you have been overspending on your monthly household budget, this is the perfect time to rein things in. Work from home policies and travel restrictions will make it a bit easier to dial back. Use this opportunity to save more and tackle consumer debt.
- Adjust your income expectations: If you have variable compensation, understand that this may be impacted, and you’ll need to plan accordingly. If you were planning on a big purchase or something that is not already included in your plan, consider waiting until the tide shifts.
- Maintain a diversified portfolio: One of the best ways to manage risk is to diversify your investments. Don’t try to time the market and stay away from trying to pick individual stocks based on headlines.
- Don’t panic: The market volatility and uncertainty can be uncomfortable in the short term, but don’t let fear or worry drive you to make decisions you might regret in the long term. Stay the course and stick to your long term plan. For those of you who tend to worry a lot, this article offers 4 Habits That Will Train Your Brain to Stop Worrying.
Finally, look out for your parents or vulnerable family members (the elderly and those with pre-existing health conditions). Also, here are some great tips on how to practice self-care and how to stay connected while social distancing.
Some of you have the flexibility to work from home and you may work in an industry that is not greatly impacted by this global pandemic. Many Americans are not as fortunate. If you experience changes in your employment situation, health, or have general concerns, I encourage you to reach out right away. We can have a conversation to discuss your situation and determine what adjustments, if any, to make.
Stay safe, stay connected, and take care!
Chloé A. Moore, CFP®
Founder, Financial Staples