• The pandemic is likely going to continue impacting your personal financial planning.
  • Regardless of your income level, you can take steps to improve your financial position
  • Manage spending responsibly. Streaming services do provide entertainment for many people in lockdown but consider reducing or eliminating little-used subscriptions. Be careful about online shopping and resist the temptation to overspend or engage in panic shopping.

The pandemic is changing the way people think about money. As a CFP® professional, I have seen the change in my clients, with some saying it feels like “a rug was pulled out from beneath them.” Depending on where you are in your financial journey, you might feel the same way.

Despite the uncertainty of how the pandemic will affect your financial planning in the long term, there are steps you can take to build financial security for yourself and your family. The first thing to remember is to avoid panic. I suggest you take a deep breath, and then focus on applying the following six strategies as you navigate the financial impact of the pandemic.

  1. Add to your emergency savings. As a financial planner, I always insist that people have sufficient emergency savings. Most people don’t. I generally recommend saving three to six months’ worth of expenses in an emergency fund. Because of the uncertainty caused by the pandemic, I now suggest keeping a year’s worth of expenses saved in the fund. If you are unsure how to begin, start by trimming nonessential expenses and dedicate any extra money saved to build your emergency fund.
  2. Reconsider your debt strategy. Carrying debt, especially high-interest credit card debt, is never advisable. With the stock market volatility, interest rates have fallen sharply. If you have loans, it may be time to refinance at a lower rate. Look for a balance transfer credit card to secure a lower interest rate on credit card debt. If you have federal student loans, the government suspended most payments through the end of September to provide some temporary debt relief.
  3. Give your budget a makeover. This situation is not normal. With great uncertainty as to what’s next for many businesses, ensuring you are able to cover essential expenses should be your top financial priority right now. Reevaluate your budget to find new ways to conserve cash. Personally, I have been spending less money on gas, parking and tolls while working from home. My daughter used to spend $12 per day on subway fares. That’s $60 per week, or close to $250 per month, that she is not spending while working from home. If you are in a similar situation, I suggest using the extra money to create a financial cushion you can rely on in the coming weeks and months as needed.
  4. If possible, invest more. I advise against selling your investments right now. Many people have seen their portfolios decrease in value, and the stock market will likely continue to experience volatility. If you can afford to, however, consider contributing more to your retirement savings and other investment accounts. Historically, we have seen the stock market always rebounds eventually.
  5. Refinance your mortgage. The Federal Reserve has cut interest rates, and that’s good news if you have a mortgage. With interest rates at an all-time low, consider refinancing. Even a 0.5% drop in your rate can save you thousands on your mortgage. It’s also a good opportunity to shorten the term of your loan. If you still have 18 years to pay on your home, refinance to a 15-year mortgage to pay it off faster and save more money.
  6. Help when and where you can. Consider ways you can help others if you can afford to. Find out if your community has a food bank and consider donating groceries or personal protective equipment. Support local businesses, restaurants and cafés to provide revenue and help keep their doors open.

If it hasn’t already, the economic downturn may have a significant impact on your personal financial planning. It’s not too late to prepare your finances for what’s to come. CFP® professionals are here to help you create or strengthen a financial plan and take control of your finances.