To say the coronavirus pandemic has taken the world by storm wouldn’t do justice to the severity of the situation. Unfortunately, we’re having to balance the negative effects of this widespread virus with job loss, reduced working hours, and decreased portfolio balances.
Times are tough. Thankfully, there are steps you can take to leverage the 2020 financial crisis and grow your wealth. Let’s talk about 5 strategies you can use today.
1. Reevaluate Your Finances (And Refinance Debt)
A financial crisis is a perfect time to go back to the drawing board and reevaluate your current financial situation. Is your emergency fund too small? Is there more risk in your portfolio than you’re comfortable with? Do you have more debt than you should?
Take a hard look at your finances to identify ways you could save money—either now or in the long run. For example, now is an ideal time to:
- Refinance your mortgage to a lower rate. Interest rates have fallen back to a historic low. As of May 20, 2020, the average APR for a 30-year fixed-rate mortgage is 3.39%. (1) If you’re looking to cut your mortgage payment, call your lender and see if you qualify for refinancing. Just be sure to factor in closing costs, which could eat into your savings.
- Take out a life insurance policy (or increase your current coverage). If you’re like most people, the coronavirus pandemic has you thinking a lot about life insurance. I’ve actually received quite a few calls from clients looking to obtain or increase coverage. The good news is, it’s not too late to apply and lock in a low rate if you’re healthy. Life insurance rates are largely tied to interest rates and the market, so buying now while rates are low could be a good way to secure your family’s financial future. (2)
2. Stay In The Market
Investing probably sounds like the last thing you want to do right now. We get it. But if you really want to grow your wealth, you should consider investing because now could be a great time to buy some stocks at a steep discount.
If we look back at the 2008 financial crisis, we see that stocks fell by more than 50%. (3) But the market began to bounce back in 2009. Those who persevered saw their portfolios eventually recover and press on to new highs.
We’ve had 12 bear markets since World War II. (4) And guess what? We recovered from every single one of them. We can’t say when stocks will stop falling or when this crisis will be over. But we do know that if you’re patient and keep on investing, the market should recover and you will reap the benefits of the recovery.
3. Limit The Losses
But what if you’re retiring soon and this financial crisis has made you realize you’re too heavily invested in stocks? In this case, it could be a smart move to set up a stop-loss for your investments. A stop-loss sets a bottom price for your securities so that when the price drops to the threshold you’ve set, they’re automatically converted to cash.
Just make sure you keep in close contact with your financial advisor so you don’t miss the market recovery when it does happen. If you’re retiring soon and are stressed about the market falling, stopping the losses can be a great way to ease your worry.
4. Find Ways To Save On Taxes
Growing your wealth doesn’t necessarily mean making more money. One of the most efficient ways to maximize your savings is to minimize your tax burden. Fortunately, there are plenty of strategies you can use to legally reduce your tax bill, such as:
- Contribute the maximum amount to your tax-advantaged retirement and HSA accounts.
- Use deductions to reduce your taxable income and credits to reduce your tax bill.
- Reevaluate your tax filing status to ensure you don’t face unnecessary penalties.
- Use charitable donations to minimize the financial impacts of required minimum distributions (RMDs).
5. Seek Help From A Financial Professional
If you’re not a financial professional, it can be stressful to figure out how to grow your wealth during the 2020 financial crisis. And considering all that’s going on in our world, you have enough to worry about. In times like these, consider connecting with a trusted financial advisor who can help you create a step-by-step plan for protecting and growing your wealth today.
Security Financial Management is a financial advisory firm that’s dedicated to helping you weather any financial storm that comes your way. Whether you need help managing your portfolio, creating a financial plan, or minimizing taxes, we’re here to help. Schedule a call today or reach out to us at SFM@sfmadvisorgroup.com.
About Security Financial Management
Security Financial Management is an independent financial services firm dedicated to delivering exceptional service built on reliability and trust. With 3 locations in Central Florida and 1 in Rochester, MN, SFM has been partnering with clients for over 25 years, providing comprehensive financial planning. To learn more about Security Financial Management, connect with them on LinkedIn.
Advisory services offered through Investment Advisors, a division of ProEquities, Inc., a Registered Investment Advisor. Securities offered through ProEquities, Inc., a Registered Broker-Dealer, Member, FINRA & SIPC.
Security Financial Management is independent of ProEquities, Inc.
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(1) https://www.nerdwallet.com/blog/mortgages/current-interest-rates/
(2) https://www.businessinsider.com/personal-finance/life-insurance-during-global-health-crisis
(3) https://www.thebalance.com/stock-market-crash-of-2008-3305535