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Pandemic playbook: 7-step checklist to improve your finances in quarantine

Pandemic playbook: 7-step checklist to improve your finances in quarantine

by Jonathan I. Shenkman
September 24, 2020

Pandemic playbook: 7-step checklist to improve your finances in quarantine

Pandemic playbook: 7-step checklist to improve your finances in quarantine

by Jonathan I. Shenkman
September 24, 2020

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The past several months have been a difficult time for the many people across the country battling the global Covid-19 pandemic. The impacts reached almost every person, from essential employees and those who contracted the virus, to the general population sheltering in place to minimize the spread of the disease. Being stuck at home has its own challenges, including educating children, remaining productive at work, and keeping one’s sanity in trying circumstances. Furthermore, many travel, business, or life plans have been put on hold until restrictions are eased and things begin to normalize.

While there are many challenges related to being in quarantine, there are also potential opportunities. A suddenly less hectic schedule may afford the ability to revisit certain projects that were on the backburner. One such example is getting your financial house in order. This exercise can be done without leaving home and can position you and your family to emerge from quarantine with a more organized, healthier personal financial situation. Going through the below 7-step checklist is a wonderful way for people at all stages of life, especially folks approaching retirement, to firm up their finances.

1. Assess your cash flow

Reviewing one’s cash flow can be a tedious, but very enlightening, process. Now is a wonderful time to go through your credit card and bank statements to get a handle on your cash inflows and outflows. Throughout the years people accumulate small and unnecessary reoccurring expenses. This may be for unused gym memberships, forgotten online services, or other miscellaneous subscriptions. Eliminating these expenses will be beneficial, especially if you are out of work or your income has been slower due to the economic environment.

On the other hand, one benefit of not being able to go out, travel, or socialize is it may free up some cash flow. Even commuting to work has substantial costs that have vanished from many people’s monthly cash flows. Using this additional savings to add to your investment or saving accounts is a great way to build your nest egg during a very challenging situation.

2. Pay down debt

If you are one of the fortunate people with some extra cash flow in this environment, then consider paying off unwanted debt. Many vendors, including credit card companies, may be willing to work with you to negotiate a debt repayment plan giving this once in century pandemic. Be proactive and take advantage of this situation to start on a path to minimize debt burden and help your monthly cash flow.

Many homeowners are using this low rate environment to improve their mortgage rates. With historically low yields, it’s worth exploring refinancing even if you bought your home just a few years ago. Naturally, before deciding to refinance it’s important to weigh all associated costs, such as origination and appraisal fees. However, if you can substantially lower your mortgage rate or shorten your loan from 30 to 15 years, the math may work out in your favor.

3. Consolidate accounts

One of the most common personal finance issues I’ve noticed with potential clients is the tendency to have a plethora of accounts at multiple institutions. Over the years, investors may open up various checking, high yield savings, trading, investment, and retirement accounts and may have multiple old 401(K) accounts. There are also old stock certificates, outdated custodian accounts, and a random assortment of other accounts that they’ve forgotten about. Now is the time to clean up this mess! Most people only need one checking account, one investment account, one retirement account for 401(k) rollovers, and their firm’s current corporate retirement plan. Naturally, everyone’s personal situation will dictate how many accounts they need, but there is usually never reason to have a dozen (or more) accounts at half a dozen (or more) financial institutions.

Many problems stem from having your money spread across numerous different financial institutions. It’s harder to see a holistic picture of your financial state of affairs. It makes it more difficult to construct a sensible portfolio and track your progress towards reaching your financial goals. It’s worth reaching out to your financial advisor, who can help you consolidate accounts, where appropriate. It should only require a few electronic signatures and a recent statement from each institution. Once your assets are consolidated it will give you a clearer picture of where you stand financially, with the added benefit of minimizing the number of statements, prospectuses, and 1099s you have to sort through every year.

4. Revisit your Investment Policy Statement (IPS)

An IPS is an important document to set up before your start investing. It highlights key parameters to help ensure that an investor’s money is being managed according to their wishes and on a course to reach their financial goals. Main components include a client’s time horizon, risk tolerance, liquidity needs, income requirements, overall financial goals, and other personal guidelines.

While it’s never recommended to make drastic changes to one’s IPS during market turmoil, it is definitely worth reviewing. Over the past several months, one’s income may have gone down and job may be in jeopardy, plus overall gyrations in the market have led many to reassess their risk tolerance and priorities. These changes may require a modification to some of the aforementioned IPS parameters. It would be prudent to schedule a call with your financial advisor during this time to review your IPS, or craft one if that step was never taken, to help you achieve your financial objectives.

5. Streamline your portfolio

No one likes to see their investments go down in value. However, this type of systemic drop can be a great opportunity to sell underperforming or inefficient investments. Many investors have positions in their portfolios that have been duds for years. They’ve pushed off selling these holdings to avoid realizing a large loss. Now may be a wonderful opportunity to sell some of these longtime underperformers. Since many areas of the global stock market have gone down in value, they can reposition that capital to other investments that are higher quality companies or have the potential to appreciate faster.

Another streamlining opportunity is to eliminate expensive or tax inefficient funds within your portfolio. It’s worth reviewing your holdings to determine if you can gain the same market exposure in a more cost effective manner. Publicly traded securities should allow you to easily find and compare this data. Additionally, if you receive too many K-1s during tax season then now may be a great time to review these alternative investments, evaluate their benefit, and determine if they are necessary in achieving your financial goals. In some instances, you may be able to eliminate some of these cumbersome or clunky investments and save yourself a headache during tax time.

6. Review important estate planning documents

The worst global pandemic in history has, naturally, caused many folks to reflect on their mortality. While the thought of one’s death is never pleasant, it is a good impetus for getting your estate planning documentation in order. It may be difficult to complete some forms in today’s world since, in some states, they must be done in person. However, one can still contact their attorney to discuss whether their wishes are adequately being reflected in their will and other documents.

It’s important to remember that estate planning is not only about financial decisions. For example, a health care proxy is a document naming a person you trust as your agent to make health care decisions for you should you be unable to speak for yourself. In light of the restrictions on travel, you may wish to rethink who you want to serve in this role. Additionally, an advanced directive is a written statement of a person’s wishes regarding their medical treatment. This includes a living will to ensure those wishes are carried out should the person be unable to communicate them to a doctor. A question often addressed in a living will is whether one wants artificial life support to prolong life. This question has taken on new meaning during Covid-19, as ventilators (a form of artificial life support) are keeping many patients alive until the virus passes or can be treated.

7. Update beneficiaries

One of the most preventable mistakes individuals make regarding their personal finances is not updating their beneficiary designations. Items with contractual beneficiary designations, like insurance policies and IRA or 401(k) accounts, are not governed by a will because they pass outside of probate. Now is a good time to review your beneficiary designations on all accounts to make sure they are up to date. Leaving money to a dead relative, or worse, an ex-spouse can be frustrating for your heirs. It’s also easily avoidable.

While there has been clear progress on managing, controlling, and treating Covid-19, there are still many challenges that lie ahead for all Americans. The one certainty is that this pandemic will eventually end and the economy will reopen. We may not return to “normalcy” as we knew it, but organizing and updating your financial affairs will help prepare for whatever comes next.

Disclaimer: This article authored by Jonathan Shenkman a financial advisor at Oppenheimer & Co. Inc. The information set forth herein has been derived from sources believed to be reliable and does not purport to be a complete analysis of market segments discussed. Opinions expressed herein are subject to change without notice. Oppenheimer & Co. Inc. does not provide legal or tax advice. Opinions expressed are not intended to be a forecast of future events, a guarantee of future results, and investment advice.

This article was written by Jonathan I. Shenkman from Forbes and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.


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