It's not a secret that the COVID-19 outbreak and subsequent recession have wreaked havoc on Americans from a financial standpoint. But a new survey by OnePoll on behalf of national nonprofit Life Happens reveals that Americans think it will take 8.5 months for them to feel comfortable with their finances due to the effects of the pandemic.
On the one hand, that's not such a shocking time frame given the extreme nature of COVID-19. On the other hand, there may be a few steps you can take to get to a more financially secure place sooner.
1. Make sure your emergency fund is solid
The best way to feel comfortable financially is to go to sleep every night knowing you have enough money in the bank to pay your bills for many months in the event you lose your job. Normally, you can get away with having three to six months' worth of living expenses on hand, but due to the recession, you may want to aim higher -- think six to nine months' worth of bills for better protection. Padding your savings account is feasible if you're still collecting your regular paycheck, but are banking extra money by not commuting, dining out, or taking vacation.
2. Keep putting money aside for retirement
A big part of feeling financially secure is knowing you're doing your part to fund your retirement. If your 401(k) or IRA fell by the wayside earlier on in the pandemic, it's time to start contributing steadily again -- especially if your income hasn't actually taken a hit yet, or if it did take a hit but has since been restored. Remember, too, that when you fund a traditional 401(k) or IRA (as opposed to a Roth retirement plan), your contributions go in on a pre-tax basis, resulting in a lower tax bill up front. And a reduced tax burden is another good way to buy yourself peace of mind.
3. Aim for a diversified stock portfolio
Many investors saw their portfolios tank back in March, when stocks plunged into bear market territory. Thankfully, the market has recovered since then, but if you're feeling insecure because of the potential for more volatility (remember, the pandemic's not over), a good bet is to evaluate your portfolio and make sure it's well diversified. That way, if a specific segment of the market takes a beating, you're less likely to get hurt.
If you're not all that well versed on choosing investments, it could pay to enlist the help of a financial advisor who can assemble a portfolio based on your goals and tolerance for risk. And if you'd rather manage your money solo for now, think about buying index funds, which give you access to a variety of stocks for instant diversification. An S&P 500 index fund, for example, effectively lets you invest in the 500 largest companies trading today.
4. Put the right insurance in place
The right protection can help you get to a more financially comfortable place. If you're without life insurance, now's a good time to buy a policy, especially if you have loved ones who are likely to struggle financially in the event of your untimely passing. If money is an issue, opt for term life insurance over whole life. You won't get lifelong protection, but your premiums will be substantially lower.
A lot of people will no doubt start changing their financial behavior in light of the COVID-19 crisis. Many will likely start spending less, saving more, and altering their retirement plans, for better and for worse. If your goal is to feel more secure in the not-so-far-off future, take the above steps to get your financial house in order. The peace of mind you attain will be valuable in its own right.