By Finbar Garcia, LUTCF, FSS, MFA
It’s been over 18 months since the pandemic reached our shores and many of us are still trying to understand where this Covid-19 came from. Regardless, it left many of us financially strapped and will continue to do so for some time to come—not just the economy that is suffering but many families lost loved ones due to the Covid-19.
How many of these were the breadwinners of the family? How many surviving spouses and children are seeing their dreams shatter before them?
While some persons lost their jobs, some temporarily laid off or are on reduced income, financial sacrifices must be made in cases like these. What have you done to protect your family from this?
Because of the uncertainty for so many families, this led to the adoption of some new and even adjusted financial habits.
Let’s look at some of the basic financial adjustments that you need to make now.
Savings: This is key to having stability in your financial affairs. If you had created an emergency fund years ago (and it’s not too late to start), this fund, based on the amount saved, would have taken your family through for a certain period based on your monthly expenses.
For many, savings are considered top priority on their budget list, and it should not be left for after your expenses. Having spoken to many families during the last few months, they are now seeing the negative effects of not having an emergency fund. Many have started to cut expenses to make ends meet. Spending less and saving more to weather the turbulent economy should become second nature: practise financial health and save.
Budget for Need versus Wants: During the last 18 months, many businesses were closed or forced to close permanently. As a result, persons spent less money on entertainment, restaurants, bars, grooming and beauty, travel, and some non-essentials that we tend to spend on which erodes our ability to save. The pandemic has forced us to modify our financial habits and embrace the new normal lifestyle, while some may be eager to get out and live life to the fullest. We need to look over our spending habits. List all your essential monthly expenses like rent/mortgage, car payment, groceries, children care etc, then start to cut from the non-essential spending. This will allow you to increase your emergency fund account to weather any storm again once you stick with your plan.
Debt Consolidation: If you are strapped for cash and have many small debts, you can consider a debt-consolidation loan. This will allow you to pay one instalment rather that multiple payments to different debts, freeing up some cash that can enhance, rebuild, or even start that emergency fund. Your credit score/rating may decline temporarily if you consolidate your debt into one loan. However, by continuing to make your payments on time and not incurring new debt your credit rating/score will improve.
Plan Ahead: The 5 P’s…. Proper Planning Promotes Prosperous Parenting. During this pandemic, both insurance claims and insurance sales increased the world over. No-one had planned to die during this pandemic. However, families lost loved ones; some may be fortunate enough to have had an insurance policy to fall back on, to assist with some debts, maybe pay off the mortgage or consumer loans left behind, continue to educate their children, and still save some money for the “rainy days”.
What do you have? By simply increasing your insurance coverage or investing in one now would make a huge difference in the lives of your loved ones if you were no longer alive.
This pandemic has caused many persons to adjust their goals, even their retirement, as persons have cashed in their retirement accounts to survive. This could have long-term personal health and financial issues if not addressed soon. Having cashed in on your retirement accounts, will mean you won’t have the best retirement you were planning for, causing you to work for some additional years.
Some hereditary family medical issues could pop up in retirement and you may not have the financial resources to weather them. Having noted the many discussions on the effects of Covid-19, it is not clear if there would be long-term medical issues once contracted, which may hinder your chances of securing additional Life or Critical Illness insurance. Some insurance companies placed a waiting period before an application for insurance can be underwritten if the applicant was ever Covid-19 positive. Don’t risk your chances of protecting yourself and your family. Plan ahead now.
“The difference between where we are and where we want to be is created by the changes we are willing to make in our lives.”
Call me for more information on planning your financial future. Send your questions to email@example.com or call 620-1185.