4 Financial Planning Items to Revisit During Tough Times

There is a financial adage that says, “Markets hate uncertainty”. It’s true – uncertainty causes stress. If there’s one thing that 2020 has served up in abundance, it is uncertainty and its accompanying feelings of fear, dread, and stress.

However, it is precisely times like this that can become pivotal turning-points in an individual’s financial journey. Shocks to cash flow can allow a chance to reexamine household spending. Fear over the health of loved ones can lead to a reexamination of what’s really important. Time off work, or time spent working from home, can give some extra space to examine long-term goals.

Here are four areas that may bear revisiting during this time of uncertainty.

1. Revisit Household Budget

Many people are finding their spending patterns are shifting drastically during this time. Now would be a good opportunity to revisit household spending and determine what is critical and what expenditures are purely discretionary. Adjustments should be made where appropriate.

This shift has led some families to find they can live on less. It may be a good time to consider reducing withdrawals from investment accounts. Conrad Siegel has an array of financial planning tools to aid those seeking to reexamine their household budgets.

2. Reflect on Priorities

Reflecting on priorities may lead to questions surrounding debt and cash reserves. High levels of debt may present an obstacle to one’s true priorities.

Now may be a time to negotiate better terms. Creditors may be more willing to work with their customers than in more stable times. Interest rates are also at historic lows. Refinancing some debt may be appropriate. Also, if spending has been reduced, there may be an opportunity to accelerate the payoff of debt.

Times of uncertainty also drive home the importance of having access to liquid cash reserves for emergencies. If spending has declined in recent months, now would be a great time to build up cash reserves.

Since every situation is different, there is no magic number that suits everyone when it comes to how big this fund should be. Conrad Siegel can help determine the appropriate level of cash reserves by examining a household’s cash flow.

3. Update Needs, Passions, and Dreams

Financial planning at Conrad Siegel often involves discussions surrounding a framework of goals that are classified into needs, passions, and dreams. Needs are goals one feels a responsibility or duty to fulfill. Passions are goals closer to one’s heart, such as spending time with family or giving to a charity. Dreams constitute “bucket-list” items that are more aspirational.

Now would be a good time to examine individual goals. Classifying them into these categories can be helpful to clarify priorities. Conrad Siegel can help with running an analysis, using current balances and expected outcomes. The hypothetical analysis could result in added peace of mind or could lead to necessary mid-course corrections.

Any discussion of long-term goals and values should also include an examination of one’s estate plan. Are documents sufficient, up-to-date, and reflective of one’s current wishes?

4. Seize the Moment

The volatility in the markets has led to the repricing of securities across asset classes. Due to this and due to recent legislation, a Roth conversion may make more sense than it would have just a few months ago.

Giving opportunities may also be a consideration. The CARES Act made some changes to the tax code surrounding cash donations to charities. Changes to price levels of securities may present a chance to give more aggressively.

Another strategy that may be beneficial during this time is to realize capital losses for use in offsetting future capital gains taxes.

Many see this time in the market as a buying opportunity. Stocks are cheaper than they have been in years. If possible, now should be a time to consider maximizing the funding of retirement accounts and building up reserves.

There is no question these are trying times. Many will suffer hardship and loss. But these are also times to reflect on values and goals, take advantages where they are offered, focus on gratitude, and lend a hand where possible. Conrad Siegel is here to help.

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