2020 was an unprecedented year by any standard. Despite spending
more time at home than ever before, many people feel like the last 12 months of
the global pandemic went by in a blur. So much changed so fast, and no one is really
certain to what extent these changes may persist into the future.
For many families — home and work life, schooling and socializing
— all have been upended. Many people are eating out less and spending more on groceries,
canceling vacations, skipping movies, but buying a lot more online.
Spare rooms have been turned into remote offices, backyards into
staycation spaces and attics into home gyms. Even if you kept your job, your spouse
could have lost his or hers. Your adult children may have needed additional financial
support or moved back home. And many have faced tremendous impacts as a direct result
of COVID-19, whether resulting from the loss of a loved one or unexpected medical
bills. Perhaps you’re working from home — for some, that change could become permanent.
With so much in flux, this is a good time to schedule a financial
check-up to review what’s changed and how those changes may affect your financial
plan moving forward. Some potential areas to cover include:
Budget. As mentioned earlier, many household budgets have
been severely impacted by the pandemic. For some, money has gotten tighter, while
others may find themselves in an improved financial position. Either way, you’ll
want to revisit how you’re allocating your funds.
Emergency Fund. COVID-19 has perhaps been the strongest
illustration in recent memory of the need for an ongoing emergency fund. Many families
have depleted the money they’d set aside. If this is the case for you, prioritize
replenishing that account as best you can, even if it’s just a little bit each month.
Debt. You may have run up additional debt to cover shortfalls
from lost family income or a pay reduction during the crisis. As a result, it’s
important to reevaluate your debt payoff strategy, revisit interest rates on the
debt you’re carrying, and try to minimize adding to your total debt if you can.
Make a list of all of your debts along with their current balances and interest
rates. Where possible, consolidate revolving credit debt onto your lowest-interest
cards — and try to negotiate lower rates with creditors when you can’t.
Retirement Plan. Some employees have borrowed from their
401(k) as a stopgap measure. If you’re one of them, make a plan to repay these funds
when possible, to avoid setting back your retirement timeline. Additionally, with
so much volatility in the market, you may want to revisit your asset allocation
and rebalance your portfolio, if necessary, to make sure it continues to align with
your investment goals and risk tolerance.
Estate Plan. It’s the subject no one likes to talk about,
but COVID-19 has made clear how important it is to address this issue. If you need
to make or change any beneficiary designations, update your will, draft a power
of attorney or establish advance directives, this would be a great time to tackle
those types of tasks.
It can be very helpful to schedule a one-on-one (or Zoom) check-in
with your financial professional, who can help you run the numbers and help you make
any needed adjustments to your budget, saving and investment strategy or any other
areas of your personal financial plan.
