If you’re like a lot of people, you may be finding that the current coronavirus pandemic has left you with a lot of extra time on your hands. And with many people out of work, most recreational destinations closed, and social distancing in place, it can be hard to actually find something worthwhile to do! The good news is that you can use some of that extra time to improve your financial health.
Here are seven tasks that can be easily accomplished to help ensure that you and your family are financially secure for a lifetime.
1.) Create a Budget
Good financial health begins with a budget. A budget helps you determine where to allocate your money each month. The golden rule of a budget is that your expenses should always be less than your income. To start your budget, determine your net monthly income -- a fancy word for your take-home pay. This is the amount you receive each month after taxes, healthcare costs, and any retirement contributions are deducted from your paycheck. Once you’ve listed your monthly net income, you can list your expenses. Some of your expenses may be the same every month, such as your rent or mortgage payment, and your car payment. Other expenses may fluctuate month-to-month, such as gas for your car, utilities, and credit card payments. If you’re unsure what amount you should pencil in for these variable items, look at your past bank or credit card statements to see how much you've typically paid for them in the past. If possible, you should budget to pay all of your credit card charges in full each month so that the charges don’t accrue interest. If that's not possible, you should budget to pay as much as you can toward one credit card and make minimum payments on the others until you bring each card down to a zero balance. And be sure to include a monthly amount for savings in your budget. A good rule of thumb is to save at least 10% of your income each month.
2.) Examine Your Spending
If you find that your expenses typically exceed your income, or you don’t have enough left over every month to put into savings, or you simply want to save more each month, find ways to cut your spending that still enable you to enjoy life. For example, if you like to read, consider using the library rather than buying books. If you like to golf, consider a public course instead of a country club. Each month, track your spending and make changes as necessary. Plus, during this time of quarantine, you probably aren't doing many of the things you used to do pre-quarantine. For example, before the coronavirus pandemic you may have gotten takeout on a regular basis, gone to a bar every weekend, or gotten a manicure or facial every week. Ask yourself, do you really miss all those expenses? Now is a good time to consider which things you could do less often, or perhaps give up altogether, to save money once the pandemic eases.
3.) Evaluate Your Financial Goals
After you have developed a budget, set goals for the short-term, midterm, and long-term future. Will you need a new vehicle soon? Do you have children that will need to go to college? Do you want to travel the world? You should develop a personal finance plan that helps you reach these goals. The plan might include ways to save more, spend less, or improve your credit score. You may find that having a role model or mentor who has successfully reached a similar financial goal will help you to reach yours.
4.) Review Your Insurance Coverage
Unfortunately, insurance policies are sometimes treated in a “set it and forget it” manner. But what was once an appropriate level of coverage may longer be so. All of your insurance policies – life insurance, auto insurance, homeowners insurance, and health insurance – deserve an annual review. If you haven’t been keeping up with regular reviews of your policies, now is the time to give each of them a thorough audit. Your circumstances in life change from year to year, so your coverage may need to change as well. You want enough coverage to protect yourself and your family in a crisis, but you also don't want to overspend by paying for coverage you don’t need.
5.) Get Serious About Retirement Planning
If you’ve put retirement planning on the back burner, now is the time to bring it into the spotlight. You should take some time to realistically estimate how much money you will need during retirement, and how long you have left to earn that money. A retirement planning calculator can help. Once you've determined your retirement needs, you should evaluate where you currently are in terms of meeting those goals. Depending on where you’re at in your retirement planning journey, you may consider opening a new retirement account, or reviewing the investment strategies and allocation in your existing accounts. If you’re looking to establish a new retirement account, options include Traditional IRAs and Roth IRAs, as well as 401(k) accounts. If you’re looking to review your existing asset allocation, you should take some time to understand the different investment options available to you. The right mix of funds will depend on your age, your goals, and your tolerance for risk. With all of the uncertainty in the market right now is a great time to meet with a financial professional or investment adviser, to help determine the best path forward for your unique retirement situation.
6.) Create a Will
Now is also a good time to create or update your will. A will describes who you want to care for your minor children and what will happen to your money and property when you die. Without a will, state laws will determine how your assets are distributed, and there's no guarantee that the state would decide as you would. Your heirs also will have to spend additional energy and money to settle your affairs in probate court if you don't have a will. While many states often allow you to write your own will, and there are many online resources available, consulting with an estate planning attorney is generally a good idea to ensure that your will is legally-sound and covers all the options.
7.) Review and Add Beneficiaries
Another good task to focus on is reviewing all of your bank accounts, retirement accounts, investment accounts, and life insurance policies to ensure that you have beneficiaries listed. A beneficiary is a person you designate to receive the funds in your account after you pass away. And if you already have beneficiaries named on your accounts, you should ensure that they’re still the correct beneficiaries. If you named a beneficiary years ago, and that person is either no longer alive, or no longer in your life, you’ll want to update the account to name a more appropriate person.
For most of us, thinking about our finances isn’t the most fun way to spend an afternoon, but in this time of quarantine and self-isolation, a lot of us have more time on our hands than ever before. So, in between your Netflix binges and your family video chats, dedicate some time to your financial well-being. Once the COVID-19 uproar has passed, you’ll be thankful you did!
Here are seven tasks that can be easily accomplished to help ensure that you and your family are financially secure for a lifetime.
1.) Create a Budget
Good financial health begins with a budget. A budget helps you determine where to allocate your money each month. The golden rule of a budget is that your expenses should always be less than your income. To start your budget, determine your net monthly income -- a fancy word for your take-home pay. This is the amount you receive each month after taxes, healthcare costs, and any retirement contributions are deducted from your paycheck. Once you’ve listed your monthly net income, you can list your expenses. Some of your expenses may be the same every month, such as your rent or mortgage payment, and your car payment. Other expenses may fluctuate month-to-month, such as gas for your car, utilities, and credit card payments. If you’re unsure what amount you should pencil in for these variable items, look at your past bank or credit card statements to see how much you've typically paid for them in the past. If possible, you should budget to pay all of your credit card charges in full each month so that the charges don’t accrue interest. If that's not possible, you should budget to pay as much as you can toward one credit card and make minimum payments on the others until you bring each card down to a zero balance. And be sure to include a monthly amount for savings in your budget. A good rule of thumb is to save at least 10% of your income each month.
2.) Examine Your Spending
If you find that your expenses typically exceed your income, or you don’t have enough left over every month to put into savings, or you simply want to save more each month, find ways to cut your spending that still enable you to enjoy life. For example, if you like to read, consider using the library rather than buying books. If you like to golf, consider a public course instead of a country club. Each month, track your spending and make changes as necessary. Plus, during this time of quarantine, you probably aren't doing many of the things you used to do pre-quarantine. For example, before the coronavirus pandemic you may have gotten takeout on a regular basis, gone to a bar every weekend, or gotten a manicure or facial every week. Ask yourself, do you really miss all those expenses? Now is a good time to consider which things you could do less often, or perhaps give up altogether, to save money once the pandemic eases.
3.) Evaluate Your Financial Goals
After you have developed a budget, set goals for the short-term, midterm, and long-term future. Will you need a new vehicle soon? Do you have children that will need to go to college? Do you want to travel the world? You should develop a personal finance plan that helps you reach these goals. The plan might include ways to save more, spend less, or improve your credit score. You may find that having a role model or mentor who has successfully reached a similar financial goal will help you to reach yours.
4.) Review Your Insurance Coverage
Unfortunately, insurance policies are sometimes treated in a “set it and forget it” manner. But what was once an appropriate level of coverage may longer be so. All of your insurance policies – life insurance, auto insurance, homeowners insurance, and health insurance – deserve an annual review. If you haven’t been keeping up with regular reviews of your policies, now is the time to give each of them a thorough audit. Your circumstances in life change from year to year, so your coverage may need to change as well. You want enough coverage to protect yourself and your family in a crisis, but you also don't want to overspend by paying for coverage you don’t need.
5.) Get Serious About Retirement Planning
If you’ve put retirement planning on the back burner, now is the time to bring it into the spotlight. You should take some time to realistically estimate how much money you will need during retirement, and how long you have left to earn that money. A retirement planning calculator can help. Once you've determined your retirement needs, you should evaluate where you currently are in terms of meeting those goals. Depending on where you’re at in your retirement planning journey, you may consider opening a new retirement account, or reviewing the investment strategies and allocation in your existing accounts. If you’re looking to establish a new retirement account, options include Traditional IRAs and Roth IRAs, as well as 401(k) accounts. If you’re looking to review your existing asset allocation, you should take some time to understand the different investment options available to you. The right mix of funds will depend on your age, your goals, and your tolerance for risk. With all of the uncertainty in the market right now is a great time to meet with a financial professional or investment adviser, to help determine the best path forward for your unique retirement situation.
6.) Create a Will
Now is also a good time to create or update your will. A will describes who you want to care for your minor children and what will happen to your money and property when you die. Without a will, state laws will determine how your assets are distributed, and there's no guarantee that the state would decide as you would. Your heirs also will have to spend additional energy and money to settle your affairs in probate court if you don't have a will. While many states often allow you to write your own will, and there are many online resources available, consulting with an estate planning attorney is generally a good idea to ensure that your will is legally-sound and covers all the options.
7.) Review and Add Beneficiaries
Another good task to focus on is reviewing all of your bank accounts, retirement accounts, investment accounts, and life insurance policies to ensure that you have beneficiaries listed. A beneficiary is a person you designate to receive the funds in your account after you pass away. And if you already have beneficiaries named on your accounts, you should ensure that they’re still the correct beneficiaries. If you named a beneficiary years ago, and that person is either no longer alive, or no longer in your life, you’ll want to update the account to name a more appropriate person.
For most of us, thinking about our finances isn’t the most fun way to spend an afternoon, but in this time of quarantine and self-isolation, a lot of us have more time on our hands than ever before. So, in between your Netflix binges and your family video chats, dedicate some time to your financial well-being. Once the COVID-19 uproar has passed, you’ll be thankful you did!