COVID-19 has impacted our lives immensely. With health appropriately being our number one concern, it is easy to put financial matters on the backburner. However, as the full impact of the pandemic remains unknown, it is important to review some key things to help ensure you are setting yourself up for financial success.
- Build an Emergency Fund: As the past few months have shown us, it is extremely important to prepare for the unexpected. If you do not have an emergency fund, consider setting aside a little each month. It is often helpful to automate your savings by having a certain amount transferred from a checking account into a savings account each pay period. Having a cash reserve in place can lessen the stress in situations that are truly unexpected. If you had to deplete your emergency fund due to COVID-19, formulate a plan for how you can begin to build it back up. A good starting point is to have at least $1,000 available. Once that is accomplished, aim to save three to six months of expenses.
- Analyze Your Spending: Hopefully you already have a budget in place, if not, now is the time to create one! If you do have a budget, it is important to regularly assess your spending habits. Has your spending or income changed recently due to the pandemic? Are you doing more online shopping or spending more on groceries? Perhaps you are spending less because you aren’t going out to restaurants – this could create an opportunity to build your savings. There are many online tools, like Money Manager available through Univest’s online banking and the mobile banking app, that track spending and can help keep you on track with your budget.
- Review Tax Withholding: If you received a refund of a $1,000 or more after doing your taxes this year, it would be wise to look at adjusting your withholding. It may make sense to change your withholding so that you are taking home more money each pay period rather than “loaning” it to the government interest-free and getting money back in the form of a tax return. On the flip side, if you owed money to the government, adjusting your withholding can prevent a tax bill and help you avoid potential penalties.
- Assess Insurance Coverage: Review all of your insurance policies to make sure you are not under-insured and subjecting you or your family to risk. Also make sure you have the proper resources of cash set aside to take care of any deductibles and co-insurance payments required.
- Save for Retirement: Despite the current uncertainty due to the pandemic, it is still important to save for the future. 401(k) plans can be an effective tool to prepare for retirement. When is the last time you adjusted your contribution? Consider if you can increase the amount you contribute each pay period to boost your savings. If you have additional investment accounts, has the impact of the pandemic affected your goals or the amount of risk you are willing to take? Regularly reviewing of your investment portfolio can ensure you are properly diversified. Working with an advisor can help create a financial plan and investment strategy aimed at your unique situation.
While COVID-19 will continue to impact our lives for the foreseeable future, making these five money moves can help give you peace of mind regarding your finances.
Univest Bank and Trust Co. is Member FDIC