Financial Planning in the Post-Pandemic Era
Financial Planning in the Post-Pandemic Era
Blog Article
One undeniable truth emerged after the COVID-19 pandemic: having a solid financial safety net is vital. The global crisis led to 114 million people losing their jobs in 2020. Additionally, COVID-19 treatments cost thousands of dollars, depending on the length and dosage of the medication.
Indeed, it’s important to save for a rainy day because life can be unpredictable. While no one hopes for another crisis, the lesson is clear: We should start saving and following healthy financial habits now.
This blog is your guide for post-pandemic financial planning. It will show you how to bounce back and create a sturdy financial plan to handle problems head-on.
How to Recover Your Finances
With the pandemic finally behind us, it’s a good time to focus on your financial health. Here are six ways to rebuild your savings and improve your finances.
1. Reassess your priorities and budget
The pandemic likely changed your daily routine. Maybe you’re working remotely now, helping you save on gas and car upkeep. Perhaps you enjoy cooking at home now and skipping takeouts.
Take some time to re-evaluate your spending habits. Track your monthly income and expenses to see where your money goes. Are there subscriptions you don’t use anymore? Can you switch to a cheaper cable package? Every dollar saved adds up!
2. Open a high-yield savings account
Did you know that your savings can grow even if you do nothing? That’s the perk of a high-yield savings account. It offers interest rates up to 12 times higher than traditional savings accounts. It’s a great option for growing your funds faster.
Alternatively, if you plan to invest in a car or house in the next five years, you can opt for a certificate of deposit account. It locks your money for a specific time but allows it to grow due to interest.
3. Repay high-interest debt
Did you incur a lot of debt during the pandemic? Are you struggling to pay them off now? One thing you can do is prioritize repaying debts with high interest since high charges can eat away at your progress.
Consider the debt avalanche method, where you prioritize paying off debts with the highest interest rate first. Conversely, the debt snowball method pays off the smallest debts first to give you a sense of accomplishment that can fuel further progress.
1. Explore investment opportunities
It’s one thing to be free of debt and other financial problems and another to be in control of your cash flow. If you want to increase your income, consider investing in profitable assets.
Investing allows your money to grow over time, helping you reach long-term goals like retirement or a downpayment on a house. There are various investment options available, each with different risk profiles. Do your research and consult a financial advisor to determine which investments suit your risk tolerance and financial goals.
2. Increase income streams
Aside from making smart investments, you can also increase your income streams. Look for freelancing opportunities, start a side hustle, or negotiate a raise at your current job. You can use the extra money to pay down debt faster or boost your savings.
Let’s say you’re a skilled graphic artist. Consider taking on design projects on the weekends to earn extra income for your needs and wants.
3. Seek help from the pros
A financial advisor can provide personalized guidance for your unique financial situation. They can help you create a budget, develop a debt repayment plan, and recommend investment options. Their expertise can support your post-pandemic financial recovery.
4 Ways to Vet a Financial Advisor
Recovering your finances isn’t easy, even when everyday life is back to normal. Hence, consider working with a financial advisor. Follow the tips below to find a partner who advocates for your goals.
1. Know your needs
Maybe you need help rebuilding the emergency money you used when you lost your job or your retirement savings that forced you to pause because of the pandemic. Knowing what you need the most can help you find a financial advisor with the expertise to personalize a recovery plan.
2. Check what type of advisor you need
There are different types of financial advisors with specialized services. One type you can hire is a fee-only advisor. They’re obligated to work for your benefit, creating plans just for you without any conflicts of interest that might come from advisors who sell certain financial products to earn commissions.
You can also consider advisors skilled in debt management or investment strategies suitable for rebuilding wealth after a financial setback.
3. Set your budget
While financial advisors provide valuable guidance, their expertise comes at a cost. Know how much you can comfortably pay for financial advice. The pandemic might have impacted your income, so prioritize advisors who offer services within your current budget.
Remember, some advisors charge a flat annual fee, while others ask for a percentage of your assets under management (AUM). Don’t hesitate to discuss fee structures upfront.
4. Get recommendations and research
Talk to friends or family members who’ve rebuilt their finances after the pandemic. Ask them about the advisors they worked with and what services they found helpful. Also, look into advisors nearby who focus on helping people recover from financial setbacks.
These steps ensure you’re partnering with a qualified person who can guide you through your pandemic recovery journey.
Questions to Ask a Financial Advisor
Once you have prospects, ask them the following questions to check their expertise and experience:
- Do you act as a fiduciary?
- How do you get paid?
- What is your method for financial planning?
- What kind of clients do you typically work with?
- What information do you need from me to develop my financial plan?
- How frequently will we meet?
- Will you coordinate with other advisors like CPAs or attorneys?
Secure Your Future
Life is full of twists and turns. While many things are beyond your control, like the pandemic, you can save yourself from financial ruin by being prepared. Take note of the above tips for recovering your finances and selecting the right financial advisor.
The more focused you are on your financial well-being, the less you’ll commit financial mistakes and the more secure you’ll be when crises arise. Report this page