Tired of binging on Netflix while waiting for the end of the Covid-19 crisis? Here are six actions you can take right now to improve your overall finances.

1. Re-evaluate your portfolio holdings, 2. Review and reassess your goals, 3. Review and reassess your risk tolerance...

Tired of binging on Netflix while waiting for the end of the Covid-19 crisis? Here are six actions you can take right now to improve your overall finances.

1. Re-evaluate your portfolio holdings to be sure they are consistent with the following underlying principles of sound portfolio management:

  • Markets work. Capital markets do a good job of fairly pricing all available information and investor expectations about publicly traded securities. As a result, and particularly for equity investments, it is very difficult for a manager to beat the market through stock picking and market timing strategies. It is even more difficult to identify the rare gifted manager in advance of a period where he will deliver superior results.
  • Diversification is key. Individual issues have risks that are unique to the issuer. These non-systematic risks provide no premium to the investor. Comprehensive, global asset allocation can neutralize the risks specific to individual securities.
  • Risk and return are related. While taking on more risk does not assure greater compensation, the compensation for taking on increased levels of risk is the potential to earn greater returns.
  • Portfolio structure explains performance. The asset classes that comprise a portfolio and the risk levels of those asset classes are responsible for most of the variability of portfolio returns. For this reason, portfolio components must be understood in term of their contribution to the portfolio as a whole.

2. Review and reassess your goals – Routines and habits are things we do every day without thinking. During this time of staying at home and social distancing, we have the opportunity to imagine life differently and think how our routines and habits have been serving us. If they have, reinstate them as soon as it is safe to do so. If not, take this opportunity to plan out what routines and habits will serve you better.

On our website, we have three tools to help you reimagine and reassess your goals. Download them, read the instructions and use these tools for yourself and to stimulate conversation with your family.

3. Review and reassess your risk tolerance – Your portfolio was built based on how you thought you would react when we experienced a sever market correction. Imagining and actually experiencing are two different things. Ask yourself if you are reacting as you imagined you would. If so, then your portfolio allocation is about right. If you are worrying much more than you thought you would, then you should adopt a more conservative allocation. On the other hand, if you are not worried at all and feeling very confident your portfolio will do well in the years ahead, then you should consider adopting a more aggressive allocation.

4. Review and reassess your need to draw funds from your portfolio – This is a good time to get a handle on your cash flow. Having a good idea where you are spending your money gives you the opportunity to project 6 to 12 months out and see what your needs will be. Then you can determine if you will need money from your investments.

If you need funds, sell just enough to meet your needs for the next 6 months. After three months, reassess. If you do have to raise cash, try to keep your portfolio in balance.

The Cares Act allows for some distributions from your IRA and/or 401K without penalty. This should be a last resort since you could do considerable damage to your long-term retirement plans to solve a short-term problem.

5. Review and assess the stability of other sources of income – Take a close look at all your sources of income and try to determine how reliable they will be if this crisis lasts for 1 month, 2 months, 3 months or longer. If you feel a significant source of income will go away, then take steps to build up a cash reserve and cut expenses.

Some mortgage lenders are offering an opportunity to defer your payments for 3 to 5 months. The CARES Act provides that lenders can’t charge you late fees and they must report your account as current to the credit bureaus . This may be a good way to cut expense but check with your lender before you take this option. You want to know if these missed payments will be added to the end of your loan or if your lender will expect some sort of balloon payment when the crisis ends.

6. Take advantage of tax-lost harvesting – This is a process of selling one asset at a loss and then buying another one. It allows you to claim the loss for tax purposes while still being invested in the market. You can get more details by reading my blog, “Coronavirus Tax Opportunity (4/3/2020)“.

Stay home, stay safe and use this time to set-up your personal finances for success when the crisis is over.

Thom Allison, CFP®
Allison Spielman Advisors

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Financial Satisfaction Survey

 


Directions: The statements below will help you to think about and assess how satisfied you are with many aspects of your financial life. Indicate your level of satisfaction for each statement with stars.
(1 star = "Not Satisfied", 3 stars = "Moderately Satisfied", 5 stars = "Very Satisfied")

I am satisfied with...

1. ...with my ability to meet my financial obligations

2. ...with the income my current job or career provides me.

3. ...with my spending habits.

4. ...with the level of debt I carry.

5. ...with the “extras” that I am able to buy for myself and/or loved ones.

6. ...with the level and quality of insurance protection I currently have.

7. ...with the amount of money that I save and invest on a regular basis.

8. ...with my current investment choices.

9. ...that I am on track to build a sufficient retirement nest egg.

10. ...with the level of employee benefits I receive.

11. ...with my style of personal bookkeeping and financial record management.

12. ...with my ability to provide financial help to family members.

13. ...with my estate plan.

14. ...with my level of charitable giving.

15. ...with the level of financial education I have attained.

16. ...with how I respond emotionally to my personal finance issues.

17. ...with my ability to communicate about my financial matters.

18. ...with the feelings I have about my money life.

19. ...that financial issues do not cause stress or strain in the relationships that are important to me.

20. ...with the working relationships I have with my financial service providers (i.e., insurance agent, banker, broker, financial planner, accountant).


© 2002 - 2018 Money Quotient, Inc. All Rights Reserved. This document is available via licensing arrangements with Money Quotient and is protected by federal copyright law. No unauthorized copying, adaptation, distribution, or display is permitted - moneyquotient.org.

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Life Transition Survey

 


Directions: In each section, select the transitions that you are currently experiencing and those you are likely to experience in the future. In addition, check transitions in the short to mid-term and long-term columns that you either hope to experience or anticipate with concern.

Work Life Transitions

1. Change in career path:

2. New Job:

3. Promotion

4. Job loss

5. Job restructure

6. Education / retraining

7. Sell or close business

8. Transfer family business

9. Gain a business partner:

10. Lose a business partner:

11. Downshift / simplify work life

12. Sabbatical / leave of absence

13. Start or purchase a business

14. Retire:

15. Phase into retirement

16. Other


Financial Life Transitions

1. Purchase a home:

2. Sell a home:

3. Relocate:

4. Purchase a vacation home / timeshare:

5. Re-evaluate investment philosophy:

6. Experience investment gain:

7. Experience investment loss:

8. Debt concerns:

9. Consider investment opportunity:

10. Receive inheritance or financial windfall:

11. Sell assets:

12. Other:


Family Life Transitions

1. Change in marital status (marriage):

2. Change in marital status (divorce):

3. Change in marital status (widowhood):

4. Expecting or adopting a child:

5. Hire child care:

6. Child entering adolescence:

7. Child with special needs:

8. Child w/pre-college expenses:

9. Child going to college:

10. Child getting married:

11. Empty nest:

12. Family special event (Bat/Bar Mitzvah, anniversary party, trip):

13. Helping and/or gifting grandchildren

14. Concern about aging parent

15. Concern about health of spouse/partner or child:


Legacy Life Transitions

1. Increase charitable giving:

2. Give special financial gifts to children/grandchildren:

3. Give parental pension (monthly stipend):


© 2002 - 2018 Money Quotient, Inc. All Rights Reserved. This document is available via licensing arrangements with Money Quotient and is protected by federal copyright law. No unauthorized copying, adaptation, distribution, or display is permitted - moneyquotient.org.

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