How will the Coronavirus affect your finances?
I’m sure you are sick and tired of getting emails, watching the news, and having conversations about the pandemic known as Covid-19. But you probably also have toilet paper to last you into next year along with frozen milk “just in case”, right? 😊
Last week Americans went into gear stocking up on the household essentials in preparation for staying home for at least 2 weeks. This is a precaution that is necessary but there are a few things you need to know about this season that could or has already affected your finances.
1. The market has tanked. Everyone who is currently investing in the stock market is freaking about how their investments have taken a noise dive. Consumer confidence has been shaken so the markets are volatile right now. But, remember back to your initial investing days… you said you were in it for the long haul. Therefore, stay put! The worst thing you can do right now is take your money out of your 401k, SEP IRA, Roth IRA or other retirement vehicle. Historically, the market does recover in turbulent times, but you must give it a chance to do so. Otherwise those losses you see today will become permanent. The good news is that everything is on sale! It might be a good time to invest more… For those of you within 5 years of retirement or already there, have a conversation with your financial advisor to discuss a personalized short-term strategy.
2. The kids are out of school. Many parents are navigating school or day care closings. If your job can be easily managed at home great for you! But for many families this is not an option. Having back up childcare options and the money to support it is important.
3. You need the essentials. Since everyone is home, that means you need more food and household supplies. Some people have gone overboard thinking that more toilet paper will end the coronavirus, but the truth is you do need to ensure you have what you need in case stores close. You don’t want to run out of important household goods or over the counter medication just in case. This takes money. Therefore, keeping an emergency fund or a cushion for times like these is vital. Just be sure you eat the food you purchased. Don’t let it go to waste.
4. Travel is inexpensive. If you were thinking of taking a trip now is the time to buy. Of course, in the short-term (about 1 month) it is best to stay home and reduce the spread of Covid-19, but after that you might be ok to travel again. Flight prices are low, and the airline industry wants you to spend your money. Be wise and don’t allow any airline tickets you already purchased go to waste. Many of the airlines are offering changes without fees. Hotel costs may also be reduced so double check current pricing for summer travel.
5. Interest rates are LOW! Mortgage interest rates are at an all-time low. Current 15-year loan rates are about 3.35% depending on the lender. This is a fantastic time to refinance your home loan or combine a home equity loan with the primary loan. I’m guessing that rates will stay low for a while since home inventory is low across the nation and our economy is bound to be affected by this pandemic for several months.
6. Some businesses are closing. Many businesses are choosing to close their doors for a season to reduce the spread of Covid-19. Although that may be necessary, here’s the problem. There are many employees who cannot go without income for 2+ weeks. If you or your spouse finds yourself in a position where you are asked to stay home without pay be sure to apply for unemployment during that time. An emergency fund can also help you weather this storm. Even if the company you work for isn’t temporarily closing there will be lots of businesses who will have a hard time recovering from a lack of customer spending. It is the sad but undeniable truth. You need to be prepared. If you haven’t made savings a priority you must do it now. You never know what is to come and this virus is proof. For now, it may be important to press pause on debt reduction and put some money into savings especially if you have a job that is volatile or already affected by this crisis. Unfortunately, many industries will experience layoffs in the coming months. You need to be ready to the best of your ability.
No one knows what the future holds but we can do our part to keep ourselves and those around us healthy. We can also take positive actions with our own finances so that we emerge from this crisis in good shape. Hopefully the above ideas will keep you feeling like you can face the season we are all in. Use wisdom with your health and your money!
