Americans have lived with COVID-19 for going on seven months. Many have experienced a loss or reduction of income and related issues such as food insecurity, depletion of savings, and outstanding payments for rent, utilities, loans, and other expenses.
Conversely, there are those who have seen little or no negative financial effects related to the pandemic. They have jobs or pensions and their investments have “bounced back” from losses suffered in March and April.
I recently presented a one-hour webinar for Rutgers Cooperative Extension called “Navigating the Two Financial Faces of COVID-19.” America is increasingly experiencing a bifurcation of impacts resulting from the pandemic. In a number of previous posts, I addressed the first face of COVID-19, those people who are struggling financially.
In this post, I share tips for the second face, the “financially unscathed” who are doing as well, or even better, than before. Below are 10 COVID-19 tips to consider if you have been fortunate enough to be navigating the pandemic without experiencing any major financial effects:
1. Beef Up Your Emergency Fund
Save more, if possible, because economic conditions (both personal and global) can change. Experts are now recommending larger emergency funds equaling six to nine months worth of expenses (or more), given the extent of COVID-related job losses. Save as much as you can whenever you can.
2. Invest in Your Human Capital
“Upskill” yourself in case you need to eventually find a new job in a very uncertain economy. Strategies include online courses, computer technology training, and certification programs. Focus on filling gaps in your skill set and making yourself marketable to future employers.
3. Consider Refinancing Your Mortgage
Consider replacing your current mortgage with a lower interest loan if the math makes sense (i.e., the interest rate savings for a projected loan term exceeds the closing costs). Mortgage interest rates are currently at historic lows, which makes homeownership attractive.
4. Make Prudent Home Improvements
Consider making home improvements that simultaneously increase the comfort of a home and provide a high return on investment, should a move become necessary.
Examples include bathroom and kitchen remodeling, landscaping, and the addition of a deck or patio. Many people are doing this by reallocating funds that were previously budgeted for cancelled travel and entertainment plans.
5. Get Estate Plans in Order
Review your existing estate plans and revise them, if necessary.
Witnessing the deaths of more than 185,000 Americans due to COVID-19 is a powerful reminder to have key legal documents (e.g., will, living will, and durable power of attorney) in place.
Expect some delays, however, as many attorneys are swamped.
6. Assess Investment Risk Tolerance
Accept the possibility that the stock market could be volatile for some time due to uncertainty about a COVID-19 vaccine, the 2020 election results, and other factors. Take the University of Missouri Investment Risk Tolerance Assessment to get an analysis of your risk tolerance.
7. Rebalance Your Investment Portfolio
Develop “triggers” to rebalance your investments (e.g., the balance in a retirement plan) to their original asset class weightings (e.g., 50 percent stock, 30 percent bonds, 20 percent cash).
Some people do this automatically on a set day each year while others rebalance when weights shift by a certain percentage.
8. Increase Retirement Savings
Consider upping retirement savings plan contributions if COVID-19 has resulted in increased income and/or reduced expenses (e.g., commuting and eating out).
Increasing savings by just 1 percent more can result in tens of thousands of dollars of extra savings over several decades.
9. Be Philanthropic
Reap the financial benefits of contributions to qualified 501(c)(3) organizations that can help others who are hurting due to COVID-19.
For the 2020 tax year, as a result of the CARES Act, taxpayers can take an “above the line deduction” and write off up to $300 of cash donations without having to itemize.
10. Become a “Personal Finance Student”
Learn at least one new thing every day about personal finance. Increased knowledge can foster preparedness, which can build resilience. Information is available via websites, social media, radio and television shows, webinars, podcasts, and other platforms.
For additional COVID-19 tips, this article provides tips for people who have been financially unscathed by the pandemic. The handout for the Rutgers Cooperative Extension webinar, referenced above, is another resource.