Money and finances can cause anxiety for many of us, even in the best of circumstances. And in these unprecedented times, your financial stress is most likely at an all-time high.
To help you navigate the current climate, I have four tips to share with you on how to deal with monetary worries and protect your financial health in the long run.
1. Have an Emergency Fund
I’ve talked about this before but having an emergency fund for unexpected events or expenses can be crucial when protecting your assets. Having an emergency fund can be the difference between a minor inconvenience in your financial life and complete disaster in your entire life. You don’t want to face dire consequences such as foreclosure or bankruptcy.
According to most financial experts, it’s recommended to save at least three to six months of net living expenses in an emergency fund. Calculate your three- to six-month number to include only necessary expenses like rent or mortgage, food, health insurance, life insurance, utilities, car payments, car insurance and gas. So, if your family requires $3,000 a month to pay all of its basic expenses, then you should strive to accumulate $9,000 to $18,000. This sounds like a lot of money, but if a certain amount is put away on a steady basis, your consistent savings can build up quickly.
Three to six months of just basic expenses will still add up to thousands of dollars, so it can be daunting to save up that much money. But you don’t have to accumulate it all at once. Start small. Shoot for a starter emergency fund of $500 to cover little emergencies. Once you’re on track, focus on building up your savings and then set a reasonable timeframe to get to the six-month number. But don’t give yourself too much time—growing your emergency fund should be a priority.
2. Don’t Look at Your TSP Right Now
With such volatile market swings, it can be easy to see your Thrift Savings Plan (TSP) take a hit and panic. But remember, your TSP is a retirement account, which means it’s a long-term investment. Try to stay put and ride this out. It’s very likely going to come back up in the months ahead as the world works to recover from this pandemic.
Knee-jerk reactions—in a good or a bad market—rarely favor the investor. Most often when people are scrambling to make a fast move in a down market, they end up regretting it because it wasn’t something that was rational for them to do. Again, the world is not ending, the U.S. stock market is not ending, and so as long as you don’t need the money right now, you’ve suffered a paper loss and, if we look historically, the market will rebound.
3. Cut Your Unnecessary Expenses
Try cutting back on things that are not needed right now. One good thing about sheltering at home is that it’s probably easier to keep track of your spending. Of course, there’s still online shopping, but going out to dinner, taking vacations, and attending outside entertainment are not options right now, so at least you’re saving some money.
Try to keep a financial journal and make a list of every single monthly expense you have, both fixed costs like rent and utilities and variable costs like groceries or household items. Then, aggressively trim wherever you can. Are there video or music streaming services you’re not using? Do you have a gym membership that you can put on hold? You can also call your cell phone company, credit card company, auto insurance agent, and internet provider to see how you can reduce your bills. They may have reduced packages or discounts that you can get at a lower cost.
4. Create or Revise Your Financial Plan
If you and your family have experienced financial hardship because of this pandemic, your gut reaction is probably to avoid thinking about money altogether. But it’s important to have a plan now—because while this crisis won’t last forever, the decisions you make today can have a long-term impact on your overall financial health.
The first step to any plan is to identify your financial goals and set a realistic budget. Find simple ways to live more frugally and make a commitment to stick to your budget. Determine the minimum monthly amount you need to cover your bills and spending during the next few months. Then you can factor in any income, such as unemployment, stimulus check, tax refund, and anything else you’re receiving. Hopefully, creating a plan and budget will give you and your family a sense of control in these chaotic times.
Now may also be the perfect time to seek guidance from a financial professional to create a solid financial plan. During this crisis, many advisors are meeting with their clients virtually — either by phone or video chat. A financial planner who specializes in helping federal employees can help you to navigate the complexities of government programs, articulate your goals clearly, anticipate planning challenges and help you to make better decisions based on your true needs.
Whether it’s a global pandemic, government shutdown, a market downturn, an emergency, or a myriad of other reasons, having control of your finances becomes exponentially more important when it’s unexpected.
Hopefully, this crisis will be over soon. Consider this an opportunity to reevaluate and improve your financial situation for the future. Be sure to ask questions and keep yourself updated so you can make smart financial decisions, but try not to let money anxiety take over your life.