Top Financial Questions Being Asked During COVID-19

Randall J. Richard
Thursday, May 28th, 2020
Posted in: Financial Planning, Retirement Security
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Top 5 Financial Questions Being Asked During COVID-19

Our Answers and Insight on the Top 5 Questions

By Randall J. Richard

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As a country, we have seen times of financial crisis before.  However, the unprecedented impacts of the COVID-19 Pandemic have directly contributed to erratic U.S. stock market behaviors – while causing historic unemployment levels and financial hardships for many Americans. Now more than ever, our Financial Advisors are fielding inquiries and providing guidance on wealth management, retirement, and overall asset management strategies.

For those over the age of 60, whether retired or not, the impact of the current crisis on personal finances can be particularly stressful. However, this particular market, which follows on a long economic surge, has the potential to cause anxiety for investors of all ages.  So, to help investors at every stage of their financial growth path, we’ve pulled together the top five questions we’ve heard over the past several weeks – and shared our advice below:

1. What is a Top Financial Priority During Times Like These?

During times of crisis, it’s critically important to have enough cash on hand to meet your core expenses over the next several months. Saving 3-6 months’ worth of non-discretionary expenses is a good rule of thumb. If it’s feasible, consider increasing your cushion to 6-9 months, dependent on factors such as job security, ability to save, and other financial goals.

2. My 401(k)/IRA is in Bad Shape, What Should I Do?

We understand periods of market volatility can feel unsettling for many investors. The temptation to make changes to your investment portfolio is a powerful feeling that can be difficult to ignore. You must remain disciplined and ask yourself, “what is my goal for this account?” Putting this into perspective will help to avoid short-term impulse decisions and keep you focused on the long-term. As the saying goes, “short-term pain will lead to long-term gain.”

3. Everyone Says Stay the Course and Allow the Market to Recover. How Do You Feel About This?

Before taking any action, you must first ask yourself, “what is the goal for this investment?” Will I be using this to supplement my retirement, or perhaps to fund a short-term goal? The answer to this question will help you determine the amount of risk you’re willing to accept. Investing is emotional, and people react based on their emotions. Everyone’s familiar with the saying, “buy low and sell high.” As a concept, this may sound easy, but in practice, it is much more difficult. We as humans are subject to inherent biases that distort our thinking during times of unease. Having a solid plan in place and sticking to it is always the best strategy. Otherwise, what’s the point of having a plan?

4. How Do I Continue To Build On My Existing Savings/Investing Plan? 

One of the best ways to build and accumulate wealth is to remain conscious of what you’re spending money on. This starts with a Cash Flow Analysis of your current spending habits. An analysis such as this can help you identify your core expenses and areas to cut back on spending and add more to savings.

Other tips include:

  • Contribute to your employer-sponsored retirement plan and fully maximize a matching benefit (if applicable).
  • Try increasing your retirement plan contributions 1%-2% per year. Aim for a 12%-15% savings rate of your total compensation.
  • Evaluate high-interest debt and determine if you’re able to pay down more quickly. The quicker you pay down, the more cash you can allocate to other areas.

5. What About Financial Planning Before a Crisis Happens?

Ideally, one should have a sound financial plan in place PRIOR to a crisis taking place. This approach is critical to helping you navigate the complexities – and to temper the emotions involved. The comprehensive financial plans we collaboratively develop with clients include “stress test” scenarios to ensure that financial position remains a strength, despite being susceptible to outside forces that are out of our control. A comprehensive plan can help put your mind at ease and shift the perspective from short-term “noise” to long-term planning.

Our “whole picture” approach to financial guidance considers every detail influencing wealth preservation and growth, with an emphasis on downside protection and risk management. In times like these, we can reflect on planning to assure we have an outline of goals to help us overcome market volatility and future crises. When you’ve taken steps to plan the financial future for your family or business, you’ll have greater confidence in your financial position.

We recommend taking some basic steps to better understand your position – and a meeting with an advisor about your financial outlook, with regular updates to adjust for life’s inevitable changes.

Planning is a great way to feel confident, and to mitigate the uncertainty that comes in times of financial crisis. Financial Advisors can offer peace of mind with expertise and strategies to stay prepared.

Have questions?  Please contact our Financial Advisor team located in South Portland, ME today. Every individual has a different set of circumstances, and we can help you personalize a strategy that fits your needs.

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For over 20 years, Richard Brothers has provided clients with comprehensive financial planning solutions and tailored investment advice with expertise in wealth management including retirement security, estate protection, business transition, education funding and corporate solutions.  The company focuses on the “whole picture” approach when helping clients realize their lifetime goals.  Headquartered in South Portland, Maine, Richard Brothers Financial Advisors provides goal-based solutions to individuals, families—as well as businesses, nationwide.