The COVID-19 public health crisis has triggered a financial crisis for many individuals and families. Whether their pain was caused by time off, layoffs or pay cuts, people have been held back from meeting their monthly obligations and progressing towards their long-term financial goals.
Now that vaccines are helping the United States move closer to normalcy and more people are finding jobs, the recovery can be a slow process. But there are simple steps people can take to get back on track and stay on a solid financial footing, says financial planner Aaron Leak (eclpwm.com), the founder of ECL Private Wealth Management.
âThe key to regaining lost ground and full recovery is making sure you put the fundamentals in place,â says Leak.
âOne of the challenges is figuring out how to do it in a climate of continuing uncertainty with the economy. But the most important thing is to have the best control over all the factors in your financial situation. “
Leak offers these stages of financial recovery:
â¢ Learn more about assistance programs. Many eligible people did not pursue avenues of assistance such as unemployment benefits, credit card hardship programs, and the Paycheck Protection Program, which is available to self-employed workers and entrepreneurs. as well as for small businesses. âIt’s important that people understand what’s available to them,â Leak says. “Some people think they don’t qualify when in fact they do, or they feel like they are a burden, or they didn’t think the pandemic would last that long.”
â¢Refine your budget. âSitting in their homes much of the year has forced people to take a serious and honest look at their finances and ask themselves, ‘What am I doing that’s costing me so much money? “Said Leak. A complete analysis begins with a thorough analysis of all monthly expenses and bills, and the elimination of bad spending habits and things they may be without. This distribution of costs helps define a reasonable budget that creates more room for savings, debt repayment and investment.
â¢Prioritize savings. The pandemic has revealed how many people do not have enough savings for an emergency. âHaving an emergency fund is essential,â says Leak. âYou need at least three months of expense savings, but ideally enough money to go through a full year. If you are back to work, each month withdraw some of the money you have cut from your monthly expenses and build up your emergency fund. “
â¢Know your 401 (k) options. If you are on leave or laid off but leave your 401 (k) with the business, you may be able to take a loan or withdrawal due to the pandemic. âThis or cashing in your 401 (k) should be a last option, as it can jeopardize your retirement nest egg,â Leak says. “After the 2008 financial crisis, people who stayed in the market were able to recover from their losses.” Another option is to transfer a 401 (k) to an IRA account. âThis offers many other choices for how to grow your money,â Leak says, âsince an IRA can be a mutual fund, an annuity, a CD, or almost any other type of financial instrument.â
â¢Refinance Your Home. The value of the house is equivalent to having another emergency fund. âThe equity in your home is there, doing nothing for you, unless you take advantage of it,â Leak says. âWhether it’s a home equity line of credit or refinancing and withdrawing funds when interest rates are low, either could be a good option.â
âEmbracing a new level of priorities and discipline will help people make better financial decisions,â Leak says.
Aaron Leak (www.eclpwm.com) has 16 years of experience in the financial industry and is the founder of ECL Private Wealth Management. He holds series 7, 6, 63 and 66 licenses as well as life, health and damage insurance licenses.