The coronavirus recession has changed financial goals and habits for many Americans. An economy that was beginning to rebound is now faltering again, with millions of people still out of work and others facing prolonged periods of reduced hours and slashed pay.
At the same time, coronavirus cases are continuing to increase across the U.S., signaling that the country is far from being able to completely recover.
It's a lot of uncertainty. With that in mind, here's four pieces of advice financial experts are giving their clients to help them weather 2020.
1. Zoom out
All the uncertainty of 2020 has been worrying for clients, says Ken Thompson, head of U.S. wealth shared services at TD Bank. Still, it's important to consider your goals 10 to 15 years out. Have they changed? If not, then keep acting with them in mind. Don't stop investing if you can still afford to do so; keep saving if you have the funds.
We're going through a little bit of a roller coaster right now. [But] the reality is we have lived through a lot of things.Ken ThompsonTD Bank
"We're going through a little bit of a roller coaster right now," Thompson says. But, "the reality is we have lived through a lot of things."
If the past eight months have made you rethink what's important, though, it's okay to recalibrate. You have to do what will help you sleep best at night, Thompson says. Prioritize what makes you feel most comfortable.
2. Focus on what you can control
Much is out of our control, including the stock market. But there are a few financial factors anyone can manage on their own, says Sarah Behr, financial planner and owner of San Francisco-based Simplify Financial Planning.
Start by making sure all of your bills, including rent or mortgage payments and utilities, are on auto-pay. Then if you "become ill and brain-fogged" the bills will take care of themselves, "rather than trying to explain to your roommate how to pay your cell phone bill," Behr says.
Another priority: Make sure your end-of-life planning is squared away.
"Everyone needs to have a will, a financial power of attorney and an advanced health-care directive," Behr says. "That's true if it's just you and your cat, or if you have a spouse and kids."
While most people are familiar with a will, assigning financial power of attorney and an advanced health-care directive are just as important if you become ill or incapacitated, she says. You give someone else — whether it's your partner or a friend — the ability to access your financial accounts and make medical decisions for you.
3. Rethink spur-of-the-moment decisions
The housing market has been especially hot in 2020, as workers leave big cities for less-expensive suburbs and small towns.
But be cautious about buying and moving, Behr says. Just because mortgage rates are low doesn't mean you can afford a home right now or in the near future. Consider what would happen if your job cut your pay or you got laid off. And if you'd have to tap into your 401(k) to make the down payment, it's not really affordable, she says.
"What will your monthly cash flow look like and will you still meet all of your goals" with your new housing payment? Behr asks. "Will the down payment exhaust all of your resources or will you still have some savings and some liquidity?"
You should also consider what will happen when you have to return to your office or you want to find a new job. If you move to a small town with fewer employment opportunities, you might regret it. Behr advises buying only if you know you'll stay in the house (and be able to afford the payments) for eight to 10 years.
4. Look for opportunities
Though trimming your spending won't solve every financial issue, now is an opportunity to rethink spending and shift it to new priorities, writes Danielle Schultz, an Illinois-based certified financial planner.
The easiest categories in a budget to make changes with are discretionary expenses such as eating out, travel and spending on kids, she says.
"This is a terrific time to do some sober reflection and set actual spending targets and limits on these categories for the future," Schultz writes.
Behr agrees. While some spending has likely decreased for you in the past few months, most people are grappling with new expenses, like increased utility bills or, potentially, private schooling for kids.
"Really understand your spending," suggests Behr. "What does a comfortable lifestyle look like for you?"
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