HCR Wealth Advisors: Managing Your Budget During Uncertain Times
We are living in unprecedented times.
Many Americans are currently feeling uncertain because of the coronavirus pandemic and managing finances during uncertain times can be quite challenging. Markets can be volatile and a continuing stream of breaking news (often negative) can leave you feeling like you have no good options left when it comes to preparing for the future.
Taking action may help you plan for the future and feel more secure, even when times are uncertain. Here’s how:
Determining Whether to Adjust Your Long-Term Savings Plans
According to research by the Stanford Center on Longevity, people should save between 10 and 17 percent of their income annually if they hope to retire by age 65. While it can be tempting to cut your savings rate during a time of uncertainty, it’s generally a better idea to consider other cuts before reducing your retirement savings. Because of the power of money’s growth over time, making changes at an early point in your career can have an outsized impact on your overall savings success.
If you do find it’s critical to reduce the amount you’re saving for retirement, you may want to look closely into the details of your employer’s retirement matching program and resolve to continue meeting their matching threshold.
For the team at HCR Wealth Advisors, objectivity is particularly important when decisions like this come under consideration. In this situation and others that involve an uncertain future, it can be easy to make an emotionally driven decision, based on immediate needs.
Taking an objective look at the situation and reviewing your choices through a long-term lens can make a big difference in how you decide to adjust your savings efforts and adhere to your future goals.
Planning Proactively for Potential Emergencies or Worst-Case Outcomes
An emergency fund is a critical part of your budget, especially if you have people depending on you. Your emergency fund might look very different if you’re a single person working in a corporate job versus if you’re an independent contractor, a parent of young children, an adult in The Sandwich Generation taking care of both a growing family and elderly parents, or an entrepreneur working to keep a business and a team of employees afloat.
For each different type of budget, there are different planning strategies involved. As an example of this differentiation, HCR Wealth Advisors offers different experiences for each specific type of saver.
- For business professionals, emergency preparedness might be a part of a long-term financial design plan that an HCR Wealth Advisors team member would help a business to build. This type of plan provides additional security when uncertainty in the greater economic scheme might make things feel a little out-of-control in the short term.
- For a person who has recently undergone a divorce, the emergency safety net that once existed may have dissolved completely. In this situation, HCR Wealth Advisors would typically work with the divorcee to build a game plan and savings scenario for both short-term and long-term situations.
- For retirees, planning for emergencies may be more related to insurance and long-term care; a partnership, in this case, might mean exploration with an HCR Wealth Advisors team member to budget for emergency healthcare or for the potential of a life-altering move to an assisted living or other healthcare facilities.
Differentiating Expenses Between Necessities and Luxuries
Luxuries aren’t necessarily a bad thing. In uncertain times, those luxuries can be cut back and still leave you with enough room for the necessities of life. Instead of budgeting every penny to essentials, determine which parts of your spending are mandatory and which ones make life a little easier.
When you’re building your initial budget, leaving room for those extra benefits that make your life easier can make sense.
For example, if you budget some additional money for personal training, you’ll be able to enjoy getting in better shape and feeling physically fit and strong. If your circumstances change or you’re concerned about the future, you can always adjust your spending or reduce these costs in order to feel more secure.
Evaluating Short-Term and Long-Term Changes
During a health emergency like the COVID-19 pandemic, some of your household spending patterns may change without much thought or effort on your part. For example, if you’re accustomed to dining out frequently, you may automatically see a decrease in your expenses because you’re practicing social distancing.
Other changes may require you to make challenging financial decisions. For example, if you’re a patron of a local theatre or museum, or a booster for your alma mater’s athletic programs, you may see event tickets and membership privileges going unused. At this point, it’s worth considering whether to continue providing support or whether to step back because of the uncertainty of the overall financial situation.
While it may be your first instinct to ask for a refund or discontinue a subscription, it can be worth considering how a change fits with your worldview.
HCR Wealth Advisors includes philanthropy as a key part of The Clarity Formula™, the framework used to build a financial roadmap for your future. Philanthropy is an important part of the formula because it’s a way to feel connected to your community and to be part of a higher purpose. When reviewing your finances in adverse times, consulting with HCR Wealth Advisors and using The Clarity Formula™ can empower you to make decisions that prioritize the things you believe are important.
Reviewing Your Investment Types Wisely
Uncertain situations and unexpected world events can lead to volatility in the markets, as businesses and individuals alike brace for every additional news update.
During times like these, investors may experience additional stress if they monitor their portfolio on a daily or even hourly basis. It often makes more sense to review data trends over time than to make a decision or get discouraged over a short-term change in the value of an investment.
According to HCR Wealth Advisors, objectivity is a key trait that is extremely valuable during times of uncertainty. Being objective, rather than allowing your decisions to be ruled by emotion or fear can allow you to adjust with the market and to control your situation instead of being controlled by it.
Taking an objective and dispassionate look at the different types of investment options available to you – stocks, bonds, certificates, real estate, etc. – can guide your decision making and help you to feel more settled and secure regarding financial choices, even when the world around you is very uncertain.
Researching Options for Additional Income or for Additional Savings
Between the potential for new expenses and potential uncertainty in the job market, it can feel very challenging and frustrating to try to make ends meet if you do encounter an adverse situation. It can make sense to look into ways to save money. However, if you’ve already cut your budget as far as you can reasonably go, your next logical step might be to look for additional revenue. Many people find success in supplementing their income with freelance work on a part-time basis, or through working part-time jobs.
While your capability to add to your workload may depend on your other obligations (parenting, your full-time job, etc.), diversification is generally a good move when it comes to finances, whether you’re considering income, investments, or other financial moves.
In times of uncertainty, the worst thing you can do is ignore or avoid making financial decisions. If you’ve prepared during calmer times, you should be able to put your plan into action and feel secure when your stress levels rise. If you don’t yet have a plan in place, following the steps in this article may give you some additional peace of mind and ensure you’re able to begin charting a smarter course forward.
About HCR Wealth Advisors
HCR Wealth Advisors is an independent wealth management firm that is built around a commitment to exceptional client service. HCR Wealth Advisors offers comprehensive financial advice and investment strategies, mapping out financial considerations and offering clarity as they help clients achieve their goals. HCR Wealth Advisors takes a holistic advisory approach as its team members work to support clients’ financial lives.
This article is provided for informational purposes only and should not be interpreted as investment advice. HCR Wealth Advisors is not affiliated with this site.