Financial Assessment

Kasey Sipiorski, CLTCKasey Sipiorski of Vision Financial has the purpose to inspire a vision of an empowered life through financial health. He wrote this article for you to take the extra time you may have as a result of COVID-19 to get a fresh restart with your finances! And if you’re looking for a new job, be sure to check out our recent page of local places hiring. We’re in this together!

We are in one of the craziest times I have ever lived. In my 49 years, I have never experienced what we have in the past couple of weeks. As my wife and I dance around trying to figure out daycare, homeschool, work and video chat for online meetings, I realized there is another world of toilet paper shortage and some who are not taking the pandemic seriously. I know that you’re dealing with it too. We’re in this together.

I wanted to write something to send to clients and prospective clients, but I found this article from The Business Insider that says everything I want to say. Here are some things to consider for perspective and guidance of your personal finances during this time of crisis. Adapted from the Business Insider.

Don’t let stress short-circuit your decisions

Stress often leads us to feeling very action oriented. We skip over the thinking and feeling and get right to doing. I encourage you, as I am doing myself, to slow down before making any decisions and acknowledge how you’re thinking and feeling before you act. Don’t hesitate to reach out to me so that we can talk things through before you make any big moves.

Will your income change in the short-term or mid-term?

Consider whether your income may change in the coming weeks or months. If there’s a decent chance that your income could drop, begin adjusting your budget right away and estimate whether your reduced income will be enough to cover your expenses.

If income won’t be enough, make a list of your next-best places to access cash to cover expenses — emergency fund, home equity line, low-interest personal loan, credit cards, etc. You may also want to investigate employer and government benefits, like sick leave, unemployment insurance, and paid family leave.

Reduce expenses for the next few months

Whether you anticipate your income will drop or not, it’s a good idea to review your budget and make some adjustments to reduce expenses for the next three to six months. Make sure to capture any money saved in your emergency fund if you can. These changes aren’t forever, so figure out what you can reasonably do in the short-term.

Stock up on cash

If we’ve worked together for some time, you likely already have a well-stocked emergency fund. This is what it’s for! I hope it’s giving you comfort to have cash stashed away if you need it.

If your emergency fund isn’t quite full, do what you can to reduce expenses short-term and put a little extra cash in the bank. For example, if you must cancel travel plans, you should be able to get full refunds, and you can put that cash in your emergency fund. Every little bit helps.

Use tax refunds to pad your emergency fund. And keep in mind that although IRS payments have been extended until mid-July, your state may still require that you file and pay income taxes by April 15. Plan to file federal and state taxes by April 15 but know that you have a little extra time to pay if you owe the IRS.

And although there’s no need to worry, it’s a good idea to make sure your cash is FDIC insured.

Stay invested

I must admit this market has literally taken my breath away several times over the last few weeks. I managed client money through the Great Recession when the market dropped 57%, but the last few weeks have been something else! If you’re freaked out and want to stop the bleeding in your portfolio, I get it. I have those same feelings. Our brains are wired to want to act and protect us from loss.

I do still, however, continue to believe that markets will continue to act like markets … more volatility, more drops, intermittent recovery days, maybe a false recovery in there (just to mess with our heads), and ultimate recovery. Volatility and recessions are the price we pay for the potential long-term gains that the market has historically provided.

If you’re thinking about getting out of the market, I encourage you to pause and think about how that will play out and when you’ll get back in.

If you get out when the Dow is at 19,000, are you going to buy back in when it hits 15,000? What if it then goes to 12,000? Are you going to get back out to stem losses or buy more? And then maybe the market eventually recovers and gets back to 30,000. Were you in on the recovery? Or did it feel too late to get back in once it was climbing? Or did it feel like a “false recovery” so you stayed out?

Our emotions are notoriously terrible at driving the right investment decisions, but they’re so strong!

If you don’t need to use your portfolio for 10+ years, if it’s substantially higher 10+ years from now, you’re in good shape. What we’re aiming for is that your portfolio doubles about every 10 years.

Even if you invested every dollar right before the Great Recession hit and the market dropped 57%, your money still would have come close to doubling over that 10-year time period.

So instead of watching your portfolio drop and feeling like a sitting duck, remind yourself that you are strategically staying invested for the long term based on historical data that has shown the likelihood of an eventual market recovery to be very strong.

Optimize your debt

With interest rates dropping, there have been some excellent mortgage rates available recently. Especially if your interest rate is 4% or higher, it could be an excellent time to refinance.

But with such low rates recently, demand for refinancing has been exceptionally high and rates have popped up a bit because of it. I’ll make sure to stay on top of rates and let you know when there’s an opportunity to lower your rate.

If you have a home-equity line of credit or adjustable-rate mortgage, your interest rate could adjust downward, which would save you some interest.

It’s also a good idea to have a clear picture of what debt you have available to you, just in case you need it.

Consult with your advisor

It’s times like this when I reach out to my clients and prospective clients to make sure they are okay. I am not able to change anything about the market or the pandemic, but I can be proactive. Being on top of it, not hiding and waiting for it to blow, over is my priority. It is simple and easy to talk about market conditions when we have a great economy, bull market, and people making money. It is not easy to have conversations when somebody’s 401(k) has dropped 25%. I have learned that people want to be heard and encouraged. If you have not heard from your advisor, I would ask why.

In the past couple weeks, I have had a lot of great conversations. Reminding clients why we have planned and saved certain ways. Making sure as we go forward, we can try to minimize the impact of negative market conditions by creating buckets of money that are not tied to the market and other sound planning tools.

Lastly, I encourage you to have a positive outlook. Life happens and this will not be the only time you have your breath taken away. Having a positive stance will not only help you, but it will help others around you. As I said earlier, we are in this together!