Typically, this is the time of year you’d be considering what to do with your tax refund. We’re still here to support you in making the most financially-sound decisions based on your personal finance situation.
But in the unprecedented and uncertain times we find ourselves faced with today, it requires a different type of attention to our finances. You likely have new variables to factor into the equation, requiring greater care and consideration. Short-term necessities have taken a higher priority than long-term planning.
Let’s focus on some short-term developments that will impact your financial decisions. Americans now have forgiveness on their tax return filing and payments as the deadline has been extended to July 15, 2020.
If you are receiving money back, you’re probably thinking differently about how to make the best use of those funds. If you owe money, you can now keep that in your bank account until July. If you’ll be receiving some financial support from the government, you’ll have the opportunity to factor these funds into your short-term financial plan.
The new remote-work environments many organizations and employees find themselves in can have positive financial effects. You don’t have the temptation of eating out with co-workers, or at least you have food more readily available should you choose to make food at home instead of opting for take-out or delivery. You’re spending less on gas as America tries to unite apart, stay home, and social distance, only venturing out for essentials. You may have the opportunity to rethink your budget, evaluating where you could adjust your spending indefinitely given changes you’ve been forced to make recently.
During these uncertain financial times, stress levels are heightened and it’s sometimes difficult to focus. How can you make the best of many new changes and scenarios you’re faced with? How can you use this time to organize your finances and position yourself for short-term financial success? Once you feel confident with your short-term plan, maybe you can start to think a bit further out. Don’t put too much pressure on yourself to plan for the future; if you are able to successfully navigate your current situation amidst everything going on, you’re doing just fine.
Here are a few things to consider as you adjust your finances:
Today’s economic situation is completely different from just a month ago. Identify what you currently have coming in through wages or unemployment insurance. Look at all adjusted monthly expenses, starting with necessary living expenses such as mortgage/rent, utilities, health insurance premiums and groceries.
If you have additional funds coming your way, determine how you can maximize that. Stretch your available funds as far as possible by eliminating any expenses that are ‘nice-to-haves’.
The standard best-practices, like ‘always have three to six months living expenses available,’ don’t necessarily apply right now. Your budget can help you identify what you pay out in necessary expenses each month. Once you determine what you have leftover, put away as much as you feel comfortable with.
You may want to create more than one savings account, knowing you have a safety net in a shorter-term account that you’d be okay accessing. This will allow you to maintain a true emergency fund that you only intend to touch when absolutely necessary.
If you are paying off student loans, interest and payments on federal loans have been temporarily suspended. You now have the opportunity to put that money towards more immediate needs if you don’t have the current capacity to continue paying on your student loans. Take advantage of government programs and funding where you need to; you’ll be able to resume payments as soon as your finances stabilize.
If you are in a good place financially, consider making some small investments while the market is down. If you are in a position to leave that money alone for a number of years to give your investment a chance to grow (and the market to stabilize), and you’re comfortable with the risk, the return might prove well worth it.
If you are fortunate enough to be in a financially stable place, consider donating resources. Many Americans are finding themselves newly unemployed. Food banks and other charitable organizations are struggling to meet the demands of an increasing population of those in need. Check out the ‘We can all help’ section of our resource center for some ideas.
Stay healthy. Stay positive. This too shall pass.