POST-PANDEMIC FINANCIAL PLANNING
The Coronavirus Pandemic has altered the landscape of our economy, and had its way of impacting nearly everyone across the world. As consumers became more reliant on digital technology to meet and communicate, both professionally and personally, organizations that quickly adapted grew. Unfortunately, many businesses, such as those in the service industry, suffered greatly as lockdowns forced massive layoffs and business closures, which impacted local economies and housing markets significantly.
Although this experience has been unpleasant; it is a reminder of the importance of proper planning, budgeting and an acceptance that “what’s next” is impossible to predict. Often considered “conservative investments”, such as rental properties, saw massive losses if tenants were unable to pay, while the Nasdaq’s primarily tech index saw record gains that have continued into 2021. Diversification has always been key to financial success, and the pandemic only further exacerbated that point.
However, there are still many lessons to be learned, and as our world continues to return back to “normal” it is important to stay financially sound as the economy continues to evolve.
Although going into 2020 our budgets may have looked similar to that of 2019, by year-end many of us saw ourselves spending far more on some services, such as food delivery, and much less on events and travel. However, as we budget through the rest of 2021, and the entirety of 2022, it is important not to go “overboard”. While new technologies and hobbies are great, it is important to balance and reevaluate our spending habits, especially as travel and events return. Simple tips, such as not going into debt to make up for lost time, and saving away any extra money from decreased spending during the pandemic are important.
Further, depending on one’s financial situation, and depending on how far into, or how close to, retirement one is, planning for education is important. Although much of what we love will return as the pandemic fades, the economy will continue to evolve and grow more complex, and the skills needed to succeed are as important as ever.
It is also essential to plan based on what has changed over the past year. As millions went on unemployment, and landlords lost rental income, families' cash flows changed significantly. Projecting not only upcoming spending, but income as well can save hardship.
Many talk of the pandemic inspiring them to make changes to fit their values realized during the lengthy time of solitude and time spent with only close loved ones. Although financial planning may not have been a focal point, it is an essential part of the discussion. Alongside these changes financial planning is essential to ensure dreams and aspirations can come to fruition. However, without careful coordination one could be set back even further by not just the pandemic, but fumbles thereafter. Some of the most important questions one should ask include:
- How much savings do I hold, and for how long could I live on these savings without current sources of expected income?
- Where do I want to live, and for how long do I plan to live in my current residence?
- What return do I need on investments to meet my goals?
- How much risk can my accounts face, while still meeting my goals?
- Do I have adequate insurance for my family should someone become ill, disabled, or deceased?
- If a member of the household became disabled for medical or other reasons, would savings and insurance benefits pay all bills without disrupting retirement savings or contributions?
- Is my portfolio properly balanced after tech companies have seen significant gains, while interest rates have been left little changed?
Although these questions should get one started considering their future, these are important to answer not only with your loved ones, but also alongside a financial planner to ensure your investments, insurances and goals can align to ensure no shortfalls.
Although planning is essential, there are other large questions individuals must answer for their future. Many individuals post-pandemic have reconsidered large swaths of their current values. Although some of us may have believed owning a condo on the beach in the south for the winter was an important goal, spending more time at home, or not even having the freedom to travel, during the pandemic may have caused a reconsideration.
For instance, many homeowners found themselves in trouble when many services were not available, or simply too backed up to schedule. During the pandemic many realized they were in over their head with their current living situations. Although making changes consistently to your portfolio of investments can be costly, making large adjustments that meet your lifestyle and abilities are essential to ensuring happiness and security throughout your retirement.
Perhaps, during the lockdown and the associated aftermath, you found yourself simply trying to find something to do. In fact, 54% of Americans say they would consider working part-time to supplement their retirement income. Picking up a job, even if only minimal, has proven to promote good health. A 2015 study of 83,000 older adults over 15 years, concluded that compared with people who retired, people who worked past age 65 were about three times more likely to report being in good health and about half as likely to have serious health problems, such as cancer or heart disease.
2020 was a pivotal year; a year no one could predict, and a year of many sorrows. 2021 has continued to see significant gains in certain markets, and the dissolving of others. However, it can also be seen as a year of revelations.
When planning for your financial future far more than just your investments themselves are key to the puzzle. Moving forward no matter how difficult the shock and horrors of the pandemic were, and continue to be, it is essential to stick to the importance of diversification, budgeting and proper wealth management.
Regardless if you need to diversify, evaluate your current insurance coverages, or are looking for a complete change of lifestyle with new goals at KCA Wealth Management we are there to help you make decisions that will impact you and your loved ones for the years to come. At KCA Wealth Management our mission is to provide our clients with the highest level of service while helping them reach their financial destination. We will help you develop, implement, and monitor a strategy that’s designed to address your individual situation.