As the COVID-19 (“coronavirus”) continues to upend Americans’ daily lives, many are wondering about how they should be managing their finances. Brian Madgett, Head of Consumer Education at New York Life, shares five things Americans can do to keep their finances on track – now and for the long term.
1. Re-evaluate your financial plan and stick to the basics.
The basics ring true during both times of growth and times of uncertainty. Having proper life insurance coverage, a well-established emergency fund, a properly diversified investment portfolio within your risk tolerance, and participation in company-sponsored retirement plans to receive any available employer match, are all vital elements of a protection-first financial plan.
“This current environment is a good opportunity to step back and evaluate how you can live within your means,” said Madgett. “In addition to understanding how your income may change and creating a spending plan that is sustainable over time, it’s also a good time to understand your employer benefits and take advantage of flexible spending accounts to offset unexpected health costs or discount programs that could provide special pricing on household items and family care services.”
2. Establish or grow your emergency fund. While it is difficult to focus on saving at a time when Americans are losing jobs, having at least a few months of expenses is critical. Save what you can, and when interest rates stabilize, consider opening a high-yield savings account.
“If you haven’t started an emergency fund, it may feel impossible to build one now. Start with what you can save now, and evaluate opportunities to pause some of the discretionary expenses you regularly incur. With most people staying indoors, considering redirecting commuting and other social funds to your emergency savings account,” said Madgett.
3. Get a handle on debt. Evaluate revolving debt such as credit card debt, personal loans or loans against your home equity and work with your lender to create a plan that is sustainable in this environment.
“Many lenders are now offering opportunities to change or temporarily suspend your payment plan,” added Madgett. “It’s a good time to reach out to your lender or loan servicer to understand the options available to you.”
4. Ensure your protection-first approach has enough protection. Life insurance is the bedrock of a protection-first financial strategy and it’s important to ensure that the coverage you have is adequate for any change in circumstances. If you’re choosing coverage for the first time, ask yourself these five questions.
“If there are any bright spots among the many terrible consequences of the coronavirus, it’s that Americans continue to prioritize the health and safety of their loved ones. Life insurance is one of the best ways Americans can ensure their families are financially protected,” noted Madgett.
5. Look to the long term. While it’s easy to make emotional decisions about money at a time like this, it’s important not to lose sight of your long-term financial goals and adjust your decision-making accordingly.
“Long-term retirement savings accounts are meant to be just that – long-term,” said Madgett. “Younger savers should stay the course with their retirement savings accounts where possible or consider decreasing contributions to ensure they are still able to receive an employer match. While those closer to retirement may have less time to recoup market losses, considering guaranteed lifetime income can help ensure basic retirement needs are met."
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