Five Smart Money Moves to Make During Uncertain Times
It’s hard to believe it’s been a year since our world changed with the COVID-19 pandemic. Since then, people have started to look at their finances through a different lens. The pandemic has created a period of financial uncertainty unlike anything we’ve seen in generations. But during times of uncertainty, the best thing you can do for your financial health is to stay calm and steer clear of making financial decisions out of fear. Here are five smart money moves you can make to help protect yourself, your money and your family during uncertain times:
Depending on your situation, you may also want to consider establishing a Revocable Living Trust. Trusts are flexible documents used to avoid probate and keep the wishes and plans of the trust owner and his beneficiaries private.
- Protect yourself from fraud
One side effect of the pandemic is an increase in fraudulent activity. Hackers are getting desperate and more creative at taking advantage of people, especially in times of need. But there are steps you can take to help protect yourself.
First, consider a credit freeze. This easy (and free) step freezes access to your credit report, making it much more challenging for fraudsters to open new accounts in your name. You should also closely monitor any minor children’s identity and consider placing a security freeze on their credit until they turn 16. Identity theft of a minor may not be discovered for years, until a child is a young adult and ready to open their first line of credit. In addition to minors, incapacitated adults represent another vulnerable population. A guardian or caretaker may want to also consider freezing (or, at the least, very closely monitoring) the credit of an adult who is incapacitated and unable to make financial decision for themselves.
Second, beware of an increase in phishing scams. Fraudsters are getting smarter at tricking people by using email and text messages that ask you to provide personal and confidential information. Be sure to verify all written communication that asks you to provide personal details by picking up the phone and calling the sender to verify accuracy.
- Review your risk management strategy
A solid risk management strategy is designed to help you manage exposure and minimize financial loss. But it’s important to remember that everyone has a different tolerance for risk. A business owner has a much different level of risk than a retired couple. Taking a holistic approach to this strategy and closely considering your own personal risk profile is key to developing a plan that’s specific to your needs. A trusted CERTIFIED FINANCIAL PLANNER™ (CFP®) can help guide you through the process of identifying risks and work with you to build a solid plan that’s right for you and your family.
- Establish a solid relationship with your banker
Now more than ever, relationships matter — especially when it comes to your financial well-being. That’s why it’s critical to establish a strong relationship with your banker. This applies to both business owners and individuals. For business owners, we saw how important banking relationships were last year when Congress introduced the Paycheck Protection Program (PPP). Business owners with an established banking relationship found it easier to apply and navigate the loan process. On an individual level, bankers can help you review your accounts and manage your cash flow as effectively as possible. They can help you plan, ensuring you have easily accessible funds in the event of an emergency or major life event. Bankers are a trusted advisor, proactively offering advice, sharing opportunities and helping you navigate tough economic times.
- Have a sound estate plan
According to a survey by Legalzoom.com, 50-60 percent of Americans don’t have a will or estate plan. And for those that do, 12 percent have created them in the last 12 months. COVID and its related potential health threats have shed light on the importance of this planning and have prompted people to start tackling this critical task. Estate plans are essential for everyone, not just the elderly or affluent. In fact, 32 percent of young people ages 18 to 34 said they got a will because of COVID, with 21 percent of that age group drawing up a will specifically because they or someone they knew had the virus. What’s more, the possibility of being put on a ventilator has become far more real during the pandemic.
An estate plan outlines how you want your assets managed should you become incapacitated and how they should be distributed to heirs after your death. Having tough conversations with loved ones and communicating key life decisions regarding health and money beforehand is critical to managing your estate.
A proper estate plan should include the following critical documents:
- Financial Power of Attorney
- Last Will and Testament
- Living Will
- Advance Directive
- Create a financial plan
If you take away anything from this article, it’s the importance of having a financial plan in place, particularly during a crisis. When the market is volatile, emotions go into overdrive, causing people to make rash financial decisions. But money decisions should always be rational, grounded and well thought out. Hiring a financial advisor is the best way to create a holistic financial plan. This trusted professional will work with you to learn about your goals and objectives, family dynamics, risk profile, cash flow and more to help create a plan that fits your lifestyle, now and in the future.
The best thing you can do for your financial health in times of uncertainty is to be proactive but not overreact. By remaining calm and working with your bank and financial planner, you can make smart financial moves that will benefit you in both the short- and long-term.
Sandy Spring Private Client Group is dedicated to helping you, your family and your business navigate today’s financial needs and plan for tomorrow’s important goals. To learn more about securing your financial future, please contact us.
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