Financial decisions can feel complex and hard even under normal circumstances. If the current market volatility has you questioning the “right” actions you should now take, you are not alone. Here are four concrete ways for you to jumpstart your financial wellness in the wake of the coronavirus.
Build Emergency Savings
Unexpected moments like these are precisely why an emergency fund of 3-6 months’ take-home pay is so critical. If you have an emergency fund to tap into, great job! If you are among the 40% of Americans who would find an unexpected $400 expense challenging to pay, know that you are not alone. We have a plan to help you build your savings.
To start, dive into your finances from the previous month. Take a hard look at non-essential spending. Eliminating even small expenses, especially monthly membership fees, can quickly add up over time. After you have cancelled or paused any non-essential recurring payments, create a budget tracker to identify where and how you spent your money. How much were you spending at restaurants or carry-out? Online shopping? Once you have that breakdown, you can more accurately set goals around what you need to start, stop, and continue doing in order to build your emergency savings.
If you’re new to the world of budgeting, the “50/30/20” rule is a great place to start. This means 50% of your income goes to your needs, 30% is earmarked for your wants and the remaining 20% goes to straight to savings. Set a goal of how much money you want to contribute to your emergency savings each month, and don’t forget to celebrate when you meet (or exceed!) your goal.
For additional help with how to approach emergency savings, explore our online resources.
Don’t Touch Your Face or Your 401k
Time for some facts. Markets fluctuate over time, and returns often come with risks. While COVID-19 is certainly adding unprecedented volatility to the stock market, it is critical to take a long-term view when it comes to investing.
Chances are that when you set up your 401k or IRA, you picked a diverse asset portfolio and selected a monthly contribution that you were comfortable saving. Trust that you picked the right option, and stay the course. When considering your retirement, the strategy you had in place in February should be your continued strategy for the months ahead. Take a deep breath and trust that the market will be okay.
When it comes to investing in your retirement, the best thing to do is invest regularly and aim to have a monthly contribution of 10-15% of your total income, if possible.
Have more questions about saving for retirement, and finding a plan that’s right for you? Check out our free digital financial resources on preparing for retirement.
Refinance a Loan
March 2020 marked a period of extreme market volatility, to say the least. To stabilize and protect the economy, the Federal Reserve slashed interest rates to record lows. These decade-low interest rates could save you money if you choose to refinance your mortgage, private student loans, or other debts. Keep in mind that federal and private student loans are different, and you could be losing benefits by adjusting your federal loan.
Traditional advice is to refinance when rates are 1-2% below your current rate. Make sure to keep an eye on your closing costs, so you can make a decision that considers all costs.
Make a Plan and Regain Control
You can only control what you can control. The good news is that your financial decisions and behaviors are 100% under your control.
Use this time at home to reset any riskier financial behaviors. This is a great time to start building healthy financial habits, while the lure of expensive purchases like events, sporting games, travel, fancy restaurants, etc. are off the table. Find your money zen – what spending habits make you happy? What do you spend money on that you have no memory of a month later? Which purchases sit on a shelf collecting dust or cluttering your space?
Take the time to build a budget and stick to it. Set up regular monthly investments. Build your emergency savings fund. Use this time as a “boot camp” to become a top-notch steward of your financial present and future. You’ve got this!
To continue upskilling your financial capability, visit the Member One Financial Education Center for our FREE suite of educational content, available 24/7!
This blog content was created in partnership with EVERFI. Member One Federal Credit Union is a member of EVERFI's Financial Capability Network, and we are proud to deliver critical financial education to our communities.