Financial Inventory - Staying On Track During a Crisis
We spoke to Russ Thornton, a Financial Advisor and founder of Wealthcare for Women, to understand how people should be handling COVID-19.
Updated on Apr 14 2020
We’re dealing with uncertain times, both socially and financially, due to the coronavirus outbreak. People are confused and worried about their financial situations, so it’s important to gain some clarity. Many folks nearing or in retirement are starting to feel the financial pressure. So, we spoke to Russ Thornton, a Financial Advisor and founder of Wealthcare for Women, to understand how people should be handling the situation.
Dealing with anxieties
We might not know the true ramifications of this situation for weeks or months, but the effects will likely impact women disproportionately. There’s a widely held understanding that women face several unique financial challenges. These include the pay gap, and the fact that women more-often make career sacrifices in order to care for family. Women tend to become caregivers supporting adult children and can also be left with the responsibility of supporting adult parents. These factors seem to create a perfect storm to negatively impact women’s finances, especially during volatile times such as these. So, while it’s important for everyone to be aware of their financial situation, women may want to pay extra attention.
It’s a turbulent time, and many people are anxious about their finances. But, whether or not you should be worried depends on your individual situation. There are folks with solid plans who are fully prepared for retirement, yet are still nervous and scared when they really shouldn’t be. People who are already retired can also find themselves more prone to panic in these situations. Once you’ve already retired, you tend to have limited choices and less flexibility within your finances, so it’s natural to feel a bit more nervous during these times. But, if you’ve planned properly, you shouldn’t have all that much to worry about. If you’re still concerned, you may want to evaluate your financial situation.
Take a financial inventory
At all times, but even more so now, folks need to take full responsibility for their finances. Knowing where you are financially lets you react and adjust accordingly. A great way to start is by taking a financial inventory. Evaluate and document all of your assets as well as all of your debts to get a thorough understanding of your own unique financial situation. This will help you identify any major or minor issues with your finances that must be addressed.
After your financial inventory, choose one or two tasks you can work on over the next 30-90 days to help improve your situation. This could include improving credit, refinancing debt, freezing credit, or even building up an emergency fund to prepare for another crisis. These don’t need to be massive undertakings, even small acts can create a large positive impact over time.
If you’re three to five years away from retirement, it’s crucial that you perform a financial inventory. This way, you can create an estimate of how much you’ll need to support your lifestyle. Be sure that you factor in any relevant pension, Social Security benefits, and part-time work into your considerations. With all of this taken into account, you need to realistically ask yourself: “will this be enough?” If the answer is no, you don’t need to panic. You may simply need to adjust your discretionary spending for retirement, or making overall lifestyle changes. Discovering that you aren’t as prepared as you thought you were is not the end of the world. There is a lot of empowerment and benefit in just knowing.
One of the largest traps folks can set for themselves is not thinking that they have any options. Thankfully, this is rarely the case. Regardless of where you are in your retirement planning process, you have options to move forward. Take the time to find the options available to you, preferably before you actually need them. This way, you’ll know exactly what course of action to take when things get difficult.
Should you push your retirement plans?
People will question their plans and decisions during any time of uncertainty, and now is no exception. If you’re considering putting off retirement due to uncertainty, your decision will depend on whether or not you have a plan in place, either on your own or with a financial advisor. If you have a solid plan, this really shouldn’t be disruptive to your overall strategy.
This isn’t to say that you won’t still need to make some adjustments. But, with these adjustments you should still be able to retire on your own timeline. However, if it looks like you’ll need to adjust significantly, you may want to look into what a later retirement may entail. Being aware of these circumstances will empower you to make the best decision possible. For example, if someone were to retire in February, 2020, they may be questioning whether or not they made the right decision. If they had a solid plan in place beforehand, the answer is yes, they still made the correct choice. If you’re on track for a successful retirement, this situation should not change that.
If you are retiring in your 60s, the odds are good that you’re going to live for at least another 15 years. So, you should be sure to make decisions that will only continue to benefit you in retirement. When things are going well it’s important to think about the long-term. However, in uncertain times, we tend to think about the short-term. Consider what you need to do now, but don’t lose sight of what you are going to do for the rest of your life. Making reactionary decisions could end up negatively impacting your finances for the long-term, so never let fear dictate these choices.
Understand where you are financially, know what you have, and keep it simple. Every decision in your finances has a tradeoff. Do what you can to be proactive, and rely on the plan you have in place. If you don’t have a solid plan, it’s time to make one, and if you aren’t sure how to begin, get started by talking to a financial advisor.
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