Anyone older than a Millennial has seen their fair shares of financial crises and economic downturns. COVID-19, the Novel Coronavirus, has caused a historic economic decline and uncertainty.
More than 23.1 million Americans filed for unemployment in April, according to the Department of Labor — this is the highest unemployment rate and the largest over-the-month increase in the history of record unemployment data.
“Because of the coronavirus pandemic, more than 20 million Americans have lost their jobs. But the stock market remains open for business, and in the last eight weeks, we’ve seen some of the most dramatic swings in history, impacting people’s long-term and short-term investments, and some investors are betting on stocks that are benefiting from the crisis,” Business Insider’s Graham Flanagan said on MSNBC. “So, what should you do with your money during the crisis, from stocks to 401(k)s to how to use your stimulus check?”
If you’ve lost your job, taken a pay cut, or are generally fearful because of the economic uncertainty, it’s good to take financial inventory to prepare yourself for a post-COVID-19 world.
What Is Financial Inventory?
When you take financial inventory, you’re checking in on your credit score, debt, savings, how much money spent (monthly but also during this crisis) so you can prepare for the world post-pandemic and plan ways to bounce back.
If you took a pay cut at work, it’s a good time to see what your bi-monthly or weekly paycheck is coming to compared to your rent or mortgage and monthly expenses. Next, figure out what type of financial debt you are in and how much you have in your savings account.
You’ll also want to open up your credit card statement and see what you spent money on during the pandemic and how it compared to your spending pre-COVID-19.
“Go hard at expenses. One place to look very quickly is your credit card debt that’s outstanding,” former Citigroup CFO Sallie Krawcheck said during an MSNBC segment. “If you could take that stimulus check and pay that off, that’s going to have a positive ripple effect of helping you. If you have a mortgage, does it make sense to refinance? For a lot of people, the answer is yes right now. Worst thing that happens, they say no.”
If you’re able to pay off any credit card debt, now is a good time.
“Credit card interest rates have dropped a little, but it’s still a higher interest rate than other forms of loans. To free up cash flow, one option is a balance transfer card,” Sara Rathner of NerdWallet wrote on the company’s website. “Personal loans are another option for debt repayment. These consolidate multiple debts into one payment that typically have a lower interest rate than what credit cards charge.”
Taking these steps will help you evaluate if you’re spending more than you make. If you spend less than you make, it can be a good time to invest in stocks or real estate that will rebound post-COVID-19.
How Do I Re-Evaluate My Budget For A Post-COVID-19 World?
If you described yourself as a foodie before the pandemic, you might not be frequenting restaurants as much post-COVID-19. Your new habits post COVID-19 all factor into your monthly budget.
When you’re evaluating your budget, you’ll first want to assess your spending priorities. Expenses such as your mortgage or rent, and healthcare, and groceries will be on the top of the list. You might have refinanced your mortgage with REX Home Loans in early March with the historic low rates, so adjusting your living expenses is essential to having an accurate budget. Next, consider travel, such as commuting or your car.
Now, you’ll want to see what extra expenses you can eliminate from your budget, or swaps you plan to make post-COVID-19. Perhaps you use to spend $75 a month on the gym, but you’ve swapped it for an at-home workout bike with a $40 a month subscription. Or if you used to spend $60 a month going to the movie theater, this is something you may cut in the coming months, even as states start to reopen, to remain safe, and save extra cash.
Next, check-in on your savings and how much you can contribute monthly to prepare for any future economic downturns or emergencies.
“Make sure you have an emergency fund,” Kimberly Palmer, a credit card and personal finance expert for NerdWallet said on the company’s website. “In general, we recommend saving three to six months’ worth of expenses. It’s also important to apply the 50/30/20 budget — 50 percent of your take-home pay goes toward needs, like groceries and mortgage or rent, 30 percent to wants, and 20 percent to debt payments and savings.”
Should I Invest In Stocks Or Real Estate Right Now?
Watching the stock market and real estate market both feel as if you’re on a roller coaster ride. Stocks rise and dip by the hour, as do mortgage rates. The best plays for post-COVID-19 success are long-sighted and don’t clear out your savings completely.
“We’re not market timers, we’re doing long term buy and hold. We would never recommend clients to get into the market now as an opportunity,” Howard Hook with EKS Associates in Princeton, New Jersey, told Business Insider in March. “It’s just not the way we manage money and financial planning.”
According to a survey from Investors.com, nearly 70 percent of investors believe COVID-19 will cause a recession that will be worse than the 2008 financial crisis. But 60 percent of those same investors also said this is one of the best opportunities to invest because stock prices are low.
“The coronavirus pandemic has put many Americans in a tough spot, and not everyone should be investing right now. If you’re going to invest, make sure you have at least three to six months’ worth of savings set aside in an emergency fund in case you lose your job,” Katie Brockman wrote on The Motley Fool. “It’s best to avoid touching your money after you invest it, so the last thing you want to do is invest and then have to withdraw your cash a month or two later to pay the bills.”
As for real estate, 20 percent of potential buyers are hoping to score price reductions of five to 10 percent, according to the National Association of Realtors’ Economic Pulse Survey. However, NAR members reported that 68 percent of sellers had not reduced their listing price to attract buyers.
“Record-low mortgage rates are likely to remain in place for the rest of the year, and will be the key factor driving housing demand as state economies steadily reopen,” said Lawrence Yun, NAR’s chief economist, on the company’s website. “Still, more listings and increased home construction will be needed to tame price growth.”
So while many buyers may be hoping for deals, the market has remained stable, making long-term investments or buying a home for your long-term goals the best choice. Talking with a REX Home Loan advisor can help you evaluate your goals to see if it’s a good time to buy a home. If you do decide to buy, REX Home Loans can offer you the best rate possible for a mortgage.
“The economic lockdowns – occurring from mid-March through April in most states – have temporarily disrupted home sales,” Yun said. “But the listings that are on the market are still attracting buyers and boosting home prices.”