If there’s one thing the coronavirus pandemic has shown many Americans, it’s how important it is that they keep their personal finances in check. Many people had long heard of the importance of having an emergency fund, only to get slammed by the recent economic downturn and global layoffs, realizing that they don’t have enough money to make it by.
While you’re reducing your expenditures due to stay-at-home orders, it’s just as important to be making a plan for your future. After all, you need to be prepared the next something this serious occurs, while still saving for future goals like retirement. If you’re truly invested in setting your future self up for success, here are a few must-follow personal finance tips.
Build (or rebuild) your emergency fund now!
As was mentioned earlier, emergency funds have an important role to play in everyone’s life moving forward. As such, it’s critical that you get to work saving up money for emergencies now, or rebuild your emergency fund if you had to dip into it because of COVID-19.
One thing to keep in mind when building your emergency fund is the target amount you want to save. Starting out, conventional wisdom states that an emergency fund should be about $1,000 or a month’s worth of expenses, whichever is higher. While that’s a good plan for normal scenarios, having a larger cushion of three or even six months may be better for some people. You may even want to increase that value more, considering recent events, especially if you have a family or are concerned about finding a job quickly if you were to lose yours.
Pay yourself first and invest in stocks.
Although the stock market may look like a whirlwind roller coaster as of late, it’s important to remember that, in the long term, this sort of dip will look like nothing more than a small blip ten or even twenty years from now. As such, it’s important that you continue to steadily invest in the stock market, even when fluctuations or downward trends may give you pause.
One way to streamline your investing strategy is to automate aspects of it with an online portfolio rebalancing tool. Especially if you have particular targets like retirement goals or college funding, it’s a good idea to rebalance your portfolio from time to time to ensure that you’re current allocations are set to meet your goals. A website like Passiv can be a helpful tool in this regard by sending you email notifications and helping you make the necessary adjustments to keep yourself on track to achieving the financial future you’ve envisioned for yourself.
Passiv mitigates the need for you to manage spreadsheets and run calculations yourself, allowing you to get the information you need to make better decisions when you need to. The fact that Passiv runs calculations for you, you can focus on how a decision will impact your future instead of worrying about if you ran your math properly.
Be smart about big purchases.
If you really want to ensure that you’re setting yourself up for success in the future, you’ll need to be smart about the larger purchases that you make. Cars are a functional tool that many people need to get around and run errands, for example, but they also depreciate in value quite quickly.
Another major purchase you’ll likely make at some point in your future is a house. It’s crucial to know what you’re getting into before you purchase a home, from understanding how a mortgage works to not purchasing more home than you can afford. Just because you can qualify for a mortgage doesn’t mean you can truly afford that monthly loan amount, so consider taking a Mortgage 101 course in order to get a second opinion on your finances.
You’ll feel much better knowing that you have your ducks in a row before you buy a new condo or home with the understanding that you’ll also be able to maintain your contributions in investing and other areas.