Why You Need a COVID-19 Financial Plan
Countries in recession, unemployment rates rising, multiple economic indicators at their all-time lows, increased market volatility– these are just some of the economic impacts we’re seeing as a result of the pandemic.
As we continue to battle the COVID-19 crisis, it is important for everyone, especially those who have had their income stream affected, to keep their finances in check and proactively find ways to navigate to recovery.
By creating a financial plan, you’ll be able to find out how long you can continue with the current circumstances, but you’ll also be able to work out how to get your finances back on track and be in a stronger financial position. This process may also reveal things you could’ve done to cushion the impacts of the crisis.
In this article, we will talk about what a financial plan is and the benefits of having one.
What is a Financial Plan?
A financial plan is like a roadmap that helps you get to your desired financial position. This is done by evaluating your current situation, setting short- and long-term goals, and putting a strategic action plan in place to achieve them. This plan also takes into consideration how you can maintain financial stability amidst times of uncertainty.
An effective financial plan is not just about savings–it encompasses the following:
- Spending patterns
- Tax position
- Risk management
- Retirement planning
- Estate planning
What are the Benefits of a Financial Plan During a Crisis?
As mentioned earlier, a financial plan is a comprehensive approach to dealing with your finances. This means having one can also aid you in times of economic trouble such as the one brought by the pandemic. While it doesn’t guarantee that you will not be affected in any way, a solid financial plan can reduce the impact on your finances.
Having one will give you peace of mind knowing you have a plan in place to adapt to what’s to come. When evaluating your current financial position and your ability to get through the COVID-19 crisis, you need to consider the following:
- Alternative sources of income
- If your cash flow is positive, negative, or neutral
- If you need to withdraw a distribution from your investment
- A strategy for liquidation
- If your investments reflect your risk appetite and are tax efficient
Riding Out the Storm
A good plan or strategy makes a huge difference as to how you’ll be able to adapt during tough times. Aside from putting you in the best position for financial success in the post-pandemic world, it also ensures that you’re prepared for the next crisis or economic downturn (whenever that may be).
If you’re only starting to think about crafting a financial plan, don’t worry because it’s not too late. We also understand that without a finance background, getting this done right can be a real challenge.
The good news is our team is ready to help you assess your situation and put together a plan that is tailored specifically to your needs. Read more about our approach to financial planning here and please contact us to learn more about how we can help you.