Therapists, such as Michael Kay of Financial Life Focus. agree that the trauma and PTSD in relation to COVID-19 will linger long after the pandemic has ended. Not only are parents impacted, but children who have been ripped from their routines are also feeling the effects and anxiety. For many, the financial implications have been anywhere from lower investment account balances to the loss of their job or earnings. COVID-19 has shaken our trust and definition of normal in our ‘take-it-for-granted’ attitude.
Reclaiming a sense of normalcy can help build confidence in moving forward and healing. While young families have a greater time to recover, the problems can be far greater. For example, many young families are part of the “sandwich” generation, looking after the needs of both their children and their parents, therefore stretching their capacity to the limit and beyond. Even if you aren’t helping or worrying about parents, having to drastically shift routines and habits can create chaos.
On the other side of this horrific coin, one can clearly see financial strengths and weaknesses. This view allows you to appreciate what you’ve done well and focus on correcting the areas that are vulnerable.
Here are a few ideas to zero-in on to help you bounce back:
- For most people, these last several months have seen their entertainment, travel, vacation, gasoline, dry cleaning costs go to zero. But what might have become illuminated is just how much it costs to run your household. In particular, how much debt you are carrying and what resources would be available without it.
- Debt can cripple your chances to get ahead and accumulate wealth for things you truly value (college for your children, a secure retirement or maybe a special vacation). Examine the debt you carry, the interest rate and term of the loans. For credit cards, unless you’re ‘gaming’ the cards, you might have a sizable rate on your unpaid balance. Not only does this balance weigh you down, but it also impacts your ability to get credit if you need it, for home buying. Focus there and get rid of those debts to create a life without balances following you month after month.
- If you lost your job and became dependent on unemployment and savings, no one needs to tell you the importance of having enough money on the side ‘in case.’ Whether it’s a global pandemic or a recession that costs you your ability to earn money, a healthy emergency fund can float you comfortably so you can focus on reentering the workforce. For those who have lived hand-to-mouth and are caught in the jaws of this dilemma, the only option is to take a very hard look at your spending decisions (from housing to take-out) and make choices that will leave a surplus at the end of the month for you to begin to fill that very important bucket.
- Two important points to consider: a. There is no hard and fast rule as to how much you should keep. It depends on your job security and how much it takes to keep your ship afloat. Note: keeping debt to a minimum can really help you keep your ‘cash on the side needs’ down. b. It would be great if you can blink your eyes and fill the bucket to be full, but realistically, it’s going to take time, focus and reasonable decision-making as to the quickest route to satisfying this need.
- Bouncing back from a bad place is actually an opportunity to rethink your priorities, talk about your values and create a game plan for the future. The conversation should begin with your understanding of your financial situation and then examining the various risks to which you are exposed. The insurance industry hasn’t even begun to deal with the impact of COVID on their actuarial algorithms and how it will impact the ability to buy life insurance or other types of protection and at what cost.
As you begin the process of assessment and next steps, remember, momentum is important. If you need help, either from a financial professional and/or a therapist to help you deal- go get it. Your path to a more secure financial life is paved with intention matched with action and follow through. Remember, nothing is static, so don’t hold onto a ‘set-it-and-forget-it’ attitude. Financial security is dynamic and requires the buy-in of all stakeholders.
Michael F. Kay is President of Financial Life Focus, LLC, a Registered Investment Advisory firm based in Livingston, NJ. A financial professional for over 25 years, Michael began his career as an accountant, later shifting his focus to personal financial planning
