COVID-19 epidemic It is not over yet, but with the introduction of vaccines across the country, it may finally be visible. While this is not the time to relax about public health measures, such as social distancing and wearing masks, now is a good time to start Financially forward thinking.
Here are seven items on your to-do list to prepare for a life-epidemic:
- Review your current financial situation.
- Debt consolidation and refinancing your mortgage.
- Create emergency savings.
- Rebalance your portfolio.
- Estimate future expenses.
- Convert retirement funds to Roth accounts.
- Make changes to your estate plan.
Review Your Current Financial Status
for most people, The epidemic affected their finances In some way, because either they lost income or saved money by staying home. Families may also have adopted expensive new habits, such as online shopping, expensive hobbies, or more frequent diners.
“When things go unsolved, it becomes easy to slip into anything,” says Marco Sarkovich, Associate Attorney at Slate Law Group in San Diego.
Now the time has come to take stock of how your financial situation has changed in the last one year. Consider such things as if you are spending more, changing your income and balancing your savings and retirement accounts. Then use this information to make your budget as necessary.
Consolidated Loans and Refinancing Your Mortgage
If you have a loan, take advantage of the current low-interest rate environment to save money. For example, you may be able to take out a personal loan to pay off high-interest loans or transfer the remaining amount to A. Credit card with low introductory rate.
“In my opinion, there has never been a better time to consolidate debt,” says Grig Hammer, president of the financial group in Scherville, Indiana. “They are practically giving money to people when it comes to refinancing.”
Thanks to rising property values, you may be eligible to refinance for more than your current mortgage balance and use the extra cash to pay off a high-interest credit card or loan. Even if you don’t need to consolidate debt, A Mortgage Refinance The result can be considerable savings.
Creating emergency savings
The epidemic was particularly difficult for people with no emergency savings. “Most Americans were not prepared for months without income,” says Sarkovich.
Build – or rebuild – your emergency fund Epidemic is a priority in the form of winds. If your budget barely covers basic expenses, look for other sources of money that can be used to save, such as incentives or tax refunds.
At the end of this year, parents are also expected to receive advances next year child tax credit. This can be another source of money set aside for a rainy day.
Unbalance your portfolio
The market took a wild ride in 2020, with stock prices dropping dramatically and then an almost vertical rebound.
“Even the best of plans did not involve a global epidemic,” says Brian O’Leary, wealth adviser and senior analyst at Aline Wealth, a wealth management firm with offices in New York and Florida. As we return to normalcy, Rebalance your portfolio To ensure that there is a proper mix of stocks, bonds and other securities depending on your goals.
This is also a good time to review how you reacted to last year’s market fluctuations. According to O’Leary, “If you’ve jumped (of the market), it’s a sign that your risk tolerance was off.” Working with a financial professional to ensure your portfolio reflects your comfort level when it comes to market fluctuations.
Estimated future expenditure
Sarkovich says gasoline prices have continued to rise, but the good news is that the price of most consumer goods has remained relatively stable in 2021.
However, inflation is not the only factor affecting the cost of your family. For example, remote work arrangements may end, sending you back to the office and requiring you to take care of the school for the children in the home.
Consider what your expenses will be in the coming months and what your current income will be. If you think you will be lacking, do not wait to make changes. Start Now adjusting your spending To ensure that you can transition to your expected post-pandemic lifestyle more easily.
Convert retirement funds to Roth accounts
If you have money in a traditional 401 (k) or IRA, then convert as much as possible Eat roth Can be a smart move. By moving money to a Roth account, the money can become tax-free and tax-free in retirement. The cash remaining in the traditional account will be taxable in retirement.
The downside to the conversion is that regular income tax must be paid on the converted amount. However, since you are going to pay taxes on money at some point, Hammer suggests that this is a good year. “Taxes are probably the lowest they have been in a long time,” he says.
The tax enforced by the Tax Cuts and Jobs Act of 2017 – which will expire in 2025 – will expire, and some high earners may see their tax rates rise earlier.
Change your estate plan
The COVID-19 epidemic has claimed nearly 550,000 American lives so far, and the sad reality is that many people have lost loved ones unexpectedly. If you find yourself in this situation, you may need Update your estate plan Life insurance, including your wishes and beneficiaries on bank accounts and retirement funds.
No one knows when the epidemic will end or what life will look like after that. However, it is not too early to wait for that day and prepare your finances for whatever lies ahead.