The COVID-19 pandemic has taken a toll on us all, but not everyone has been affected in the same way.
When it comes to the economic consequences of the pandemic, individual impact has varied widely. As we head toward a potential economic recovery, financial planning should be reflective of how the pandemic has impacted you personally.
As such, it’s helpful to think about ourselves in one of two categories: those who have been negatively impacted financially by the economic downturn and those who have not.
For those who remained financially stable throughout the pandemic and already had a strong financial plan in place, the advice can be narrowed down to one primary objective: stay the course. It may be easy to think an economic rebound will mean large gains in the stock market, but those waiting to get in have likely already missed the boat.
It is very possible, if not likely, that current prices have already factored in the forecasted rebound. Instead, you should always plan to invest with a long-term, goal-based mindset calculated based on risk tolerance in relation to those goals.
Meanwhile, for those who have experienced financial hardship because of the pandemic, a potential economic rebound is a welcome forecast, to say the least. Families across the country have had their earning potential drastically impacted and emergency savings dwindle over the last year and a half. Many have taken on additional debt just to get by.
If you or your family suffered negative economic consequences as a result of the pandemic, there are a few simple steps you can take to get back on track.
As with any financial hardship, the first important step on the road to recovery is to pay down your debts. Prioritizing debt payoff will decrease the interest you accumulate, freeing up more money down the line. If you still have a savings nest egg, do not feel bad about dipping into it to get your debt into a more manageable position.
After paying down your debt, start rebuilding your emergency savings. Most financial experts suggest having at least six months of emergency savings accumulated to cover expenses if you lose your source of income. This means six months of rent or mortgage payments, utilities, insurance, and food and water.
In order to pay down your debt and rebuild savings, even after life has returned to normal, most in this situation will have to take a hard look at their spending habits and make realistic changes to meet their new goals. Putting these principles in place will lead you down the path to financial wellbeing.
In a similar vein, timelines for future goals may need to be extended. Many people will have to push back their previous retirement timelines or update savings and investment goals to align with their new situation. While this can be disappointing, it may be one of the most critical decisions you make to ensure your long-term financial well-being. Once timelines are extended, the negative effects of the past year and a half quickly begin to look less dire. Above all else, remember to stick to your new plan. It won’t always be easy, but if you remain dedicated, you will be back in good standing before long.
COVID-19 and its effects may have changed your situation in the short term or forced you to adjust timelines and expectations related to your goals, but the paths we must take to achieve those goals remain. Whether you found yourself experiencing financial hardship during the pandemic or not, it’s important to remember that the principles that guide us toward financial well-being have not changed.