The coronavirus pandemic has created a very uncertain market environment right now.
However, your long-term financial goals are probably still the same: buying a house, getting your kids through college, starting your own company, giving back, and retiring on your terms.
The path towards those goals might have swerved a little in the past few weeks.
But if you are still working and your income hasn’t been disrupted too severely, these four tips will keep you heading in the right direction.
1 – Re-budget
Can anyone else relate….?
Corona Virus Lockdown spending:
Clothes & Makeup £0
Trips out £0
Meals out £0
Seriously though, the pitfalls of online shopping haven’t changed just because you’re ordering essential supplies and food in a crisis.
When (mostly) everything you want is just a click or swipe away, it’s all too easy to buy everything.
You might think you’re spending less just because you’re not going out for meals and entertainment right now. But if you’re not keeping track of your clicks, you won’t know until you get your credit card bill at the end of the month.
A little bit of planning and budgeting can spare you a significant spending shock.
Take stock of what you need before logging into your shopping account. Schedule a week or two of meals so that you’re not ordering out every other night.
And think before you click on every discounted movie, online class, or entertainment subscription that pops up on your screens.
And as for your Chocolate and Wine spend, hands up who has lost count?!
Also, take a hard look at any subscriptions and extracurricular activities you won’t be able to use during social distancing.
For example, Sky Sports, which offers the option to ‘pause’ your subscription until sporting events resume.
Talking of sport, you might think about cancelling your sports club, or gym membership that you can’t use it right now.
Before you do this, however, you might want to keep supporting some of these organisations, as we’re all in this together in such a small community as the Isle of Man.
They may be lending out some gear, or their content has gone/is going online. Check out Vagabonds RUFC Youtube channel with some excellent Home Workouts posted.
Phone, or look on their Facebook page to see their up to date information.
While you’re at it, as, you might check out your favourite local restaurants, farmers market and garden centre; especially if they’ve moved to a delivery service even.
Others costs you might be better off recouping now if possible but do give it some thought first.
2 – Build up your emergency fund
Ideally, your stay-at-home budget should be less than what you’re used to spending in a typical month.
For most people, the best use for extra funds is to build up your emergency savings account.
Even when interest rates are low, we recommend that you have enough money set aside to cover six months of your living expenses.
That reserve could be critical in this crisis, especially if there’s a sudden health issue or necessary home repair. Just imagine if this sort of tip had been taught in our schools, we’d likely all be in a better position.
Once we get to the other side of this crisis, a healthy emergency fund is going to be an essential cornerstone of your retirement plan.
And if what you’re saving on gas, daily Costa, and twice-weekly carryout lunches are getting swallowed up by your online shopping. Take another look at that budget.
3 – Give responsibly
It’s been inspiring to see communities rally around restaurants and other small businesses that have adapted to social distancing.
Many of these establishments have implemented contactless delivering or curbside pickup, which keeps customers safe and helps business to go on as best as they can.
People are also buying gift cards and donating to funds that support the newly unemployed, charitable organisations, and health care professionals.
We’re glad that the pandemic has inspired charity and goodwill in so many people. But remember that giving is still spending.
If going out to dinner three or four nights every week would hurt your regular budget, delivery will do the same.
Buying every gift card and donating to every cause could throw off your budget just as quickly as overspending on groceries. Even your best intentions need to have limits.
4 – Explore your options
Once you’ve covered your basic needs and emergency savings, there are other things you should consider to stay on track for your long-term financial goals:
-Under the new Coronavirus Aid, announced by Isle of Man Government, it depends whether you are an Employer or an Employee, or potentially both if you are a (small) business owner.
Here is a link to the business support page of our excellent Isle of Man Chamber of Commerce to put you in touch with the right contact to help you.
-Younger investors might find opportunities to invest at a discount. Older investors might want to reallocate to cash and bonds.
-Interest rates are low, so it could be a good time to look into refinancing your mortgage. You could also investigate mortgage deferment options.
-If you’re struggling to make ends meet because of the pandemic, it might be possible to tap into some of your retirement assets to help you through the next couple months.
We’ve been hard at work sorting through all of these details, as well as other options that we believe could benefit our clients.
Let’s have a conversation about how your monthly budget is adapting to the pandemic, and how we can help you keep moving towards your financial goals.