During difficult times it is easy to feel overwhelmed. In the past, I have personally found it helpful to make a list of what can be done. Staying calm and focused on the long term when the present seems uncertain brings many people needed peace. I hope this list of 20 financial planning tips during the COVID-19 crisis helps bring you ideas to focus on in your finances.

1. Stay Safe and Healthy

First, I want to wish everyone the best. I hope everyone is staying well and safe during this difficult time. Currently, many people are facing adversities and with God’s grace we’ll get through this. My prayer is that we all stay safe and healthy. As I wrote in my book, The Quest for Financial Independence, do what you can to stay healthy so that you can enjoy the financial independence you work to achieve. Our long-term health plays such an important part in any plan for a financial future. Use this time to eat healthy, exercise and stay safe.   Our health is our most important asset plus additional health costs can have a big impact on your future as well..  

2. Take Stock of the Situation

Now, let’s discuss the stock market. I think it’s an understatement to say the markets have been extremely volatile. The S&P 500 closed on February 19th at 3386.15. And, on March 23rd the S&P 500 closed at 2237.40. That’s a 34% decline from the February 19th high to March 23rd low. I don’t expect this type of volatility to change any time soon; however, there have been some positive gains in the last few weeks. While most economist agree our health crises must be resolved first before any positive or negative outlook on the economy can be communicated, the most recent Federal Reserve and Federal Government actions have given hope of much needed relief to families, businesses, and the economy. I would like to encourage each of you to be patient and steadfast when it comes to your investment approach and your long-term goals. If you have questions, please consult with a qualified advisor.

3. Examine Your Budget

Consider utilizing the extra time created through social distancing to organize your financial life. You may find expenses are significantly reduced by the fact social distancing has reduced eating out, going to movies, shopping, and travelling. You should document your past three months of expenses to identify what are necessary monthly expenses as well as those expenses you and your family can do without. The goal is to streamline your budget along with establishing a budget for the next three months as our country navigates through this health and economic crisis. You may consider using a planning software to assist in examining your budget and organizing your finances.

4. Look to Your Cash Reserve

With liquid assets such as a cash reserve you do not earn a great deal of interest, but what cash lacks in this regard it makes up for in P.O.M. — peace of mind. Often I discuss with clients the need to have 3–6 months of cash reserves. Again and again, I have found that the clients who feel less stressed are the ones who have achieved a personally comfortable cash level. If you are having financial hardship, this is that emergency time to utilize those cash savings. If you need to access those emergency funds, utilize your zero to low interest savings first.

5. Review Your Mortgage

Mortgage rates have fallen and, under the right circumstances, a homeowner who refinances now may be able lower monthly payments and save over the life of the loan. Borrowers with no negative changes to credit or income since the date of their original loan and who carry higher interest loans stand the most to gain from refinancing at this time. Review your own mortgage interest rates to see if refinancing at a lower rate is in your best interest.

6. Take an Inventory of Debts

If you are experiencing cash flow or financial difficulties, take inventory of all your debts and then call each lender to discuss programs available to address your current payment due. Lenders may offer relief of those payments for a couple of months with no penalties nor interest.

7. Manage Student Loans

If you or a family member have federal student loan payments, you can request student loan payments be suspended until September 30, 2020. In some cases during that suspension, no late fees, no penalties, nor interest will accrue. Many experts say this relief is automatic; however, I suggest you contact your lender to be certain. If you have a private or an FFEL student loan, those don’t qualify for the suspension of payments automatically; however, it is suggested to call your lender to see if there are any possible accommodations they can make.

8. Review Your Insurance

Times such as these make us all examine our health and mortality. With this thought in mind you should gather, record, and review your health, disability, long-term care and life insurance policies. It’s important for you to know if you have the correct amounts and type of coverages for each type of policy. Consult with a qualified financial advisor or your insurance representative to review your policy and coverage amounts.

9. Consider Investment Savings

For those of you who have excess cash reserves, steady and reliable income, and a seven year time horizon or greater, this may be an opportune time to consider developing a game plan on how to place those excess reserves in the market to buy securities at these lower values.

10. Review Your 401(k) Contributions

Another point to consider for those who have a steady and reliable income is to review your 401(k) contribution percentage. While your discretionary spending is down, consider increasing your contributions into your 401k. The maximum for 2020 is $19,500. If you’re over the age of 50, the maximum is increased to $27,000 for 2020. Also, consider whether changing your contribution allocation to purchase more aggressive equities is in your best interest during this market downturn.

11. Look into Roth Conversions

Roth conversions are a topic I’ve discussed in the past with many of my clients. With account values being lower due to the market decline and potential income being lower due to the disruptions some have experienced with salary, bonuses, or business income, now may be a good time to convert part, if not all, of an IRA to a Roth IRA. However, this may not be a suitable solution for all, so it is important to contact a qualified advisor before making any decisions.

12. Rebalance Your Portfolio

Review your investment portfolio and rebalance your accounts. For example, for a particular investor’s portfolio allocation, equities are supposed to be 70% and bonds 30%, but now, due to the market downturn, equities are 60% and bonds are 40%. This investor may consider selling bonds and buying more equities to get back to the initial risk profile of 70/30. Furthermore, he or she may consider buying any additions more aggressively during this downturn as well. However, it is important to determine if this is a suitable strategy for you, so consult a qualified advisor before making any decisions.

13. Look for Tax Loss Harvesting Opportunities

Another possibility to consider is whether you have tax loss harvesting opportunities. Review all non-IRA investment accounts for any tax loss harvesting opportunities. With this strategy you are looking to offset realized gains in some securities by selling securities that may have declined in value.

14. Reevaluate Your Monthly Distributions

If you are retired and taking monthly distributions, consider ceasing distributions from your investment accounts and taking them from excess (more than 6 months of expenses) emergency cash, if available. If excess emergency cash is not available, consider taking your distributions from the cash or the fixed income portion of your investment portfolio.

15. Think About Wills and Trusts

If you have not addressed your estate planning, now is a good time to do so. If you have a completed estate plan, please review your wills, trusts, titling of your assets, beneficiaries on all accounts, health care directives, and power of attorney. You need to make sure that you have all of this in order and your loved ones know where this information is located.

16. Research the COVID-19 Relief Bill

In addition to the above suggested tips, I also would like to invite you to familiarize yourself with the COVID-19 relief bill that was passed and signed last month. I know that everyone has already probably read about the rebate checks and unemployment benefits and I’m assuming you have those details. Nevertheless, there are a few other areas you may not have read about that may be of help to you, family members, or friends. Some are listed in the remaining tips.

17. Review Required Minimum Distributions Changes*

Please review the recent legislation affecting required minimum distributions (RMDs). As part of the new COVID-19 relief, RMDs are not required to be taken for those who have not taken them to-date in 2020. However, RMDs have tax implications, so consult your tax advisor for any tax advice before making any changes to your RMDs.

18. Emergency IRA or previous Employer 401k Distributions

The new COVID-19 relief legislation has also resulted in changes that may help those with certain 401(k) and IRA accounts. If you have a 401(k) where you are not an active participant or a current IRA, you may take withdrawals of up to $100,000 without the 10% penalty and you can spread taxes due over a three-year period. Such a strategy has tax implications, so please consult your tax advisor for tax advice before taking any action.

19. Emergency 401(k) Loan or Distributions from current Employer

For 401(k) accounts where you are an active participant, the COVID-19 relief legislation is also worth reviewing. The loan provision has been revised such that you may be able to take up to $100,000 of loans or 100% of your account balance, whichever is less. But you must check with your employer to see if your 401(k) plan document allows for this and check with your tax advisor before taking action.

20. Research Loans for Business Owners

The CARES Act provides substantial forgivable loan opportunities with the Paychecks Protection Program (PPP) through the SBA 7(a) program for business owners. These loans are designed to help you with operational issues such as payroll, rent, and any other utilities that you must pay in order to keep your business operational. Contact your private lender to see if it is not too late to apply. In addition, there is the COVID-19 Economic Activity and Disaster Loan for businesses. You may contact the SBA or apply online for this assistance.

I hope these suggestions help. We here at INTELUS Wealth Management are praying for everyone’s safety. While the COVID-19 health crisis is not over yet there are steps you can take to manage your financial affairs and work toward your long-term goals. Contact us or your advisor with any questions to ensure that you are prepared to protect your legacy and your financial future.

Best Regards,

Stanley T. Funches, CFP®, ChFC®, CRPC®, MBA

*Please consult your tax advisor for any tax advice.

The information provided here is for general information only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

There can be no guarantee that strategies promoted will be successful and no guarantee of positive results.

Please note that rebalancing investments may cause investors to incur transaction costs and when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability.

Traditional IRA account owners should consider the tax ramifications, age, and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.

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