Today, so many of us are afraid about our futures, particularly when it comes to our finances—and rightfully so. While some businesses have begun to open their doors, many are still shuttered or operating at far less than full capacity. Some organizations have disappeared entirely, unable to pay their rent during the shutdown. Experts are predicting that we’ve only seen the beginning of big companies—the kind many thought would be around forever—filing for bankruptcy. Budgets have been slashed and so have jobs. As a result of all this turbulence, the unemployment rate has reached a record high.
If you’ve been affected financially—whether you and/or your spouse have lost a job, received a pay cut, or struggled to manage a business with dwindling patrons and funds—you’re likely wondering about how COVID-19 will affect your savings, particularly since we don’t know how long any of this will last.
The reality is that nearly all nest eggs, no matter their size, begin to look substantially smaller when you’re not sure just how long you’ll have to depend on them. Dipping into—or living entirely on—your savings is a scary prospect, but recognizing the reality of your current circumstances is the first step in cultivating confidence.
First, if you’ve followed the advice of numerous financial planners and saved at least six months of living expenses for emergencies, this is the exact situation for which you have been preparing. Let that knowledge serve as a bit of relief. You’ve built up a bit of a cushion, and it’s okay to rely on it when necessary. After all, that’s why it’s there.
To make those savings funds last longer, consider where you can cut back—if possible. Can you order takeout fewer times a week, or cut an online subscription or two (or five) from your monthly budget?
You can also think about how the lifestyle changes you have adopted due to the coronavirus have helped you save a bit more automatically. For example, maybe your fancy gym membership is on hold since the building is closed for the time being. Perhaps the money you’d typically spend on gas or public transportation in service of your commute is remaining squarely in your pocket since you’re not heading to and from the office anymore. Those funds that would go toward entertainment—movie theaters, bars, concerts, and more—are probably sticking with you, too. A single streaming subscription or a weekly happy hour with friends may not seem like much, but it all adds up.
It’s also important to recognize and come to terms with the impact of relying on your savings now. During this time, you may not be able to add to your savings. Or, you may be adding significantly less than you were before. What does that mean for the future? Perhaps you may have to save a little more out of each paycheck once you’re earning again, or retire a little later than anticipated to make up for lost time. If you consider the potential outcome of your current circumstances and make a plan to address it when you can, you may be able to find some relief. Confidence can be invaluable.
If you are fortunate enough to be in a position where you can continue to save, keep doing so. You’ll be helping to secure your future for years to come no matter what life decides to throw at you. And, as all of us can attest from recent events, that’s a lot—more than most of us had imagined previously!
Another action you can take if you are able is to buy or even hold on to great equity investments. Why? When you buy during bear markets—when equity prices are low—you have the potential to get much higher returns than you do when you buy during bull markets—periods when equities are expensively priced.
The bottom line? These are certainly worrying times, but all is not lost. Take stock of the work you’ve done, accept your current reality, and consider moves for a more sustainable future.