Any day now, if you haven’t already, you’ll probably be receiving your quarterly 401(k) statement in the mail or on line. It won’t be pretty reading. The stock market over recent weeks has taken the whole country on a wild roller coaster ride, and with all the turmoil it’s hard to know what the average investor should do. With that in mind, as part of our series on helping you deal with the impact of the coronavirus, we bring you this recent article from Forbes in which contributing reporter Juan Carlos Medina introduces the idea of what he calls “a pandemic financial survival kit.”
Financial Survival: Staying Calm Helps You Weather the Storm
“The headlines about the coronavirus and reports of how it will impact the economy and potentially lead to a recession are all a cause for concern,” Medina begins. “The total impact of the extreme slowdown and virtual shutdown of many businesses is yet to be seen.” However, he says, there are elements common to any financial crisis, and these still apply even with the upheaval caused by the coronavirus. If you hope to succeed financially – in other words, to emerge from the crisis fundamentally healthy – there are steps you need to take before, during, and after the storm.
Above all, he says, remember, we will get back to normal. DON’T PANIC!
Financial Survival Means Taking the Long View and Waiting Out the Crisis
“Investing is for the long haul,” Medina reminds us, “and in most cases, trying to time the market is a losing game. You may want to follow the advice of many investing experts and just stay the course.” In the Forbes article Medina includes a link to what he calls a Risk Tolerance Questionnaire to help ensure you have the right mix of investments. If you’re managing your assets yourself, it might be time to reallocate between stocks and bonds.
“Remember, the important thing is to stay diversified and focused on your long-term goals,” Medina says. “When it comes to investing during a downturn, the answer is often not to do something. It is to just stand there (and maybe avoid checking your accounts too much). If anything, you might just get excited about the opportunity to buy investments ‘on sale’ the next time you get paid and contribute to your 401(k) plan.”
Financial Survival: “Cash is King” When a Fiscal Emergency Strikes
“In an emergency, cash is truly king,” says Medina. “No matter how adequate your emergency savings are, you never know how long you might need to cover expenses in the event of a loss of income. The rule of thumb is to 3 – 6 months of expenses in a savings account.” How much you set aside is up to you, but you need to have those funds readily available in a savings account or other form that’s safe and accessible. You might want to separate emergency funds by opening a dedicated emergency savings account with automatic deposits to boost your balance faster.
Another tool Medina recommends for peace of mind is a “crisis budget.” This what-if spending plan “drills down to exactly how much you would need for the essentials like food, shelter and transportation,” he writes. “Knowing how much you need to survive will help prevent you from panicking because you know exactly what to cut back on and how long your savings would last.”
Financial Survival: If You Lose Your Income, Contact Creditors Immediately
Many seniors are working these days, and lay-offs appear to be increasing rapidly. Should this happen, there are steps you should take quickly. “Even if you have an emergency fund, we have no idea how long a loss of income might last,” Forbes says. “As a safety measure, contact your creditors and inform them of your status. Hopefully, most of your creditors are well aware of the impact of the virus on their clients and will offer to work with you if you get to a point where you could no longer pay your bills. You might realize that the more you communicate with your creditors, the more willing they will be to work with you.”
This is also the time to implement the crisis budget and adjust your lifestyle to the new reality. “Basically, any expense that does not involve the essentials such as food, shelter and transportation should come to a halt,” Medina writes. “This will help you weather this transitional period.”
Financial Survival: When Things Return to Normal, Stay Cautious
When the storm is over, you’ll have some rebuilding to do, so resist the urge to splurge. “After a crisis, there might be a temptation to immediately go back to your prior spending, but doing that will prevent you from rebuilding your emergency savings,” Medina says. “Plan to stick to your crisis budget until your emergency savings are rebuilt. Making this decision now can help prepare you and your family and make this a minor blip on your finances rather than a life-altering crisis.” Don’t panic. Stay focused. And remember, this, too, shall pass.
Two Important Retirement-Planning Announcements from AgingOptions
At AgingOptions our chief desire is to help you prepare for the kind of retirement you’ve always dreamed of having. Toward that end, we want to share two important announcements that are designed to facilitate your LifePlanning process even during this period when most of us are required to avoid gathering in groups.
First, Rajiv Nagaich has scheduled several of his popular, free LifePlanning Seminars in the form of webinars that you can watch conveniently at home. Simply visit our Events Page and register for the webinar of your choice.
Our second announcement: in cooperation with our partners at LifePoint Law, we are excited to launch a ground-breaking new service called the LifePoint Law Emergency Legal Kit. Without leaving your home, you can now consult with a LifePoint Law attorney who will work with you to prepare and sign a complete set of vitally important legal documents including both Financial and Healthcare Powers of Attorney, a Living Will/Advance Directive, a Will or Trust, and much more. Click on the link above or call us at AgingOptions and we’ll explain this excellent service to you.
Reliable information has never been more important – and that’s our promise to you at AgingOptions and LifePoint Law. Age on!
(originally reported at www.forbes.com)