Here are five of the many ways your advisor can help you make the best of your financial situation during and after the COVID-19 crisis.
Re-evaluating the plan that’s in place.
As painful as declining account balances may be, making necessary changes to an existing course of action can be even more challenging. For those nearing retirement, it might mean working beyond your target date, while adjustments in spending may be needed for those who have already retired. Others may have a buffer that’s significant enough to withstand the current market uncertainty. With all this in mind, one of the most impactful things that your advisor can do right now is to re-assess where you stand relative to your financial goals. The impact of recent events will vary from one client to the next but everyone can benefit from fully understanding their fiscal circumstances.
Determining if you need budget modifications.
Adjustments to financial plans aren’t created equal, so look to your advisor when tightening the belt is necessary. He or she can help you determine the most effective and realistic tactics that will also result in the biggest impact. For example, in light of recent economic setbacks, you might fear that you’ll have to reduce your spending by 25% for the short term to get back on track. But deep cuts like these are painful to make and difficult to maintain. Making smaller, long term changes to annual spending is often a better solution. Or, conversely, you may find that you’re spending less during the pandemic with travel, shopping, and dining restrictions in place, leaving you with more discretionary funds. If you don’t already have an emergency fund with six to nine months of living expenses saved up, consider focusing your saving efforts there. It’s always a good idea to have money saved up in case of a financial emergency, but in uncertain times it becomes even more important.
Identifying payments for temporary elimination.
Many people are suffering serious cash flow impediments as a result of the COVID-19 crisis while others are fortunate to be relatively unaffected. But the uncertain future of the economy and markets warrants caution, especially where defensive actions can be taken with little to no downside. With temporary payment deferrals in place for mortgages, utilities, federal student loans, and more, it can be confusing to know what’s best to pay and what you can hold off on. Your advisor can help identify which account payments should be considered for reduction, given your specific financial situation. A word of advice: pay your credit card bill even if it’s among those that are offering a deferral. Otherwise, you’ll be accruing interest on the balance each month.
Ensuring that your portfolio is optimally allocated.
Asset allocation is a flexible investment concept that can be utilized on an as-needed basis. There’s not a strict schedule of a daily/weekly/monthly adjustment because everyone’s situation is different. However, the coronavirus health emergency has made investing challenging and the markets volatile. Now is the time to review your investment portfolio with your advisor to ensure that your allocations reflect your risk tolerance and are balanced to carry appropriate risk-reward expectations despite market fluctuations.
Drafting or reviewing estate planning documents, along with your attorney.
Estate planning is understandably among the last things anyone wants to deal with. Many people may think they don’t have enough money to require estate planning, while others don’t want to focus on their own demise. But beyond the financial aspects, a critical element of estate planning involves wishes for end-of-life care. It ensures that important questions like, “Do you want to be kept alive through the use of artificial machines?” and “Do you wish to be an organ donor?” have been properly addressed. If you haven’t yet done this type of planning for your future, the COVID-19 pandemic may be just the motivation you need to take action. If you already have estate documents in place, now is a good time to revisit them to ensure that they still reflect your wishes.
While no one knows how long this crisis will last, we will get through it. In the meantime, you can rely on our knowledgeable financial advisors to help you keep things in perspective and avoid making emotionally-driven monetary decisions. To learn more or to get started on your personal financial plan, please contact us today.
About FAI Wealth Management, Inc.: Located in Columbia, Maryland, FAI focuses on helping clients create the financial future they desire by protecting their wealth, making the most of their assets, and planning for life’s uncertainties. The firm combines fee-only, fiduciary-driven guidance with highly personalized, consultative financial planning and investment services that enable individuals, families, and businesses to navigate complex life transitions. Founded in 1987, FAI currently manages more than $350 million in client assets nationwide. For more information about FAI Wealth Management, please visit the website at https://www.faiwealth.com or call 410.715.9200.