Revisiting Your Financial Plan Amid The Global Pandemic? Here’s All You Need to Know
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COVID-19 has had a massive impact on the lives of many people. The virus has disrupted every country in the world and crashed markets around the globe. As the economies go down and a bear market appears, investors have been stressfully watching the changes from the edge of their seats. But the important thing to remember here is that every downturn in the market is followed by a recovery.
While you wait for the market to recover, here are some investment instruments that can help protect your financial plan from losses.
An emergency fund
With a crisis knocking at your doorstep, the most essential financial instrument that you must include in your financial plans is an emergency fund. Many factories have been shut down and small businesses are suffering the most with a drop in sales. Employees are being laid off from organizations, and salaries are being delayed. While income sources seem to be in jeopardy, the expenses remain more or less the same. Food, personal care products, rent, electricity bills, mortgage payments, etc. are not going anywhere, even in a pandemic. This is why it is important now more than ever to have an emergency fund in place that can help you cover the costs of essentials.
A retirement plan
One of the biggest mistakes that investors are making in the current times is prioritizing the present over the future. Times ahead may seem bleak, but there will be a day when all of this will be over. While maintaining sufficient funds is evidently crucial right now, you should not let it tamper with your long term goals like retirement. Cutting back on your contributions to retirement accounts like the 401 (k) or an individual retirement account (IRA) can set you back by many years. Try to save for the present by cutting other avoidable expenses like overstocking essentials and panic buying. You should try to not meddle with your retirement savings, unless absolutely necessary.
An estate plan
Coronavirus has affected many lives which can make you question the chances of your own mortality. Constant fear and panic can make things seem mortifying and frightening. However, there is no harm in being prepared. This is a very crucial time for people to revisit or draft their estate plans. With everything in a frenzy, having a carefully drafted living and last will, advance directives, medical and financial power of attorneys, trustees, executors, and successor trustees and executors are essential. This is the least you can do to protect the interests of your family.
A healthcare plan
Needless to say, health care costs should be a priority for everyone right now. Make sure that you have a health insurance policy in place for every member of the family. If you have recently lost your job and were dependent on your employer-funded healthcare plan, you should get a private insurance plan as soon as you can. The same goes for young parents who may not have had the time to insure their children yet in the middle of this chaos. Just a couple of days of hospitalization and tests can cause a severe dent in your savings. It is vital to be financially equipped with a medical plan that can cover such costs.
A well diversified portfolio
The bear market has caused a lot of stress and panic around the country. But instead of second guessing your chances of profit, now is the time to diversify your portfolio. If you invest in stocks from different countries, industries, and sectors, your chances of risk substantially decrease. For example, while the stock prices of airlines are likely to fall and experience losses, commodities like hygiene products, food, etc., have seen a hike in demand. A well diversified portfolio can help you balance the red marks on your portfolio.
Income tax returns
With the lockdown in place, the Internal Revenue Services (IRS) has pushed the deadline for filing taxes to July 15, 2020. However, delaying to file your taxes may not be the best thing to do right now, especially if you are expecting a return. If your Adjusted Gross Income or AGI for 2019 is less than your AGI in 2018, you could also qualify for a full stimulus payment. Try to maximize every opportunity that you have to earn some money and build your liquid reserve.
Other sources of income
As stated above, the fear of unemployment is at its highest today. You or your spouse can lose their job anytime. This can come in the way of your daily expenses, lifestyle, and other short term and long term goals. It can also be problematic if you have debts like education or car loans to pay off. Finding other sources of income, despite having a contingency fund, is a good way to ensure financial stability. If you own a home, you can consider applying for a home equity line of credit. There is no immediate interest accrued on the money you borrow on home equity, and you can solve your pressing financial concerns.
To sum it up
With all the time in the world at your disposal, try to revisit your financial plan and make sure it is strong enough to survive a global pandemic. These basic yet vital instruments can keep you afloat in a crisis and also ensure a financially secure future for you and your loved ones.
If you need help in financial planning for COVID-19, you should consider consulting professional financial advisors for more guidance.