In the midst of global panic, employers are doubling down on efforts to protect the wellbeing of their employees.
A tall order, no doubt. COVID-19 doesn’t just pose a threat to your team’s health. It’s also affecting their personal finances in a big way.
To help ease some of the financial worry for employees, here are 5 reminders to pass along to your team.
Think long-term with retirement accounts.
Seeing your retirement account fall by 25% without warning can feel devastating. And because of uncertainty around Coronavirus and how it’ll impact the economy, things could get worse before they get better.
But that doesn’t mean it’s time to panic.
The stock market has always recovered and continued to rise after going down, including after The Great Depression, the 1987 stock market crash, September 11 terrorist attacks, and the 2008 Great Recession. Here’s a chart that puts things in perspective.
Remember, unless you withdraw money or lock in losses by selling funds in your retirement account, you haven’t lost anything yet.
If you don’t need this money tomorrow (or more likely for decades), the best action is probably no action. Keep a long-term mindset and avoid making a bad situation worse with emotional mistakes.
Adjust your spending and budget.
Spending on travel, eating out, and entertainment (with the exception of Netflix) will naturally go down with social distancing. For some, large budget line items like daycare and commuting costs have been reduced to zero.
But it’s important to adjust your budget for other potential expenses.
- Many are stocking up on groceries, household supplies, and medicine cabinet essentials.
- Parents are facing the reality of months at home with their children while schools are closed.
- Some are dealing with even harsher realities, like being laid off and losing their paycheck entirely.
Because it’s unclear how long this will last, it’s smart to be more cautious than normal with spending.
But what exactly does that look like?
First, take an inventory of any recurring expenses that you may no longer need. Freeze your gym membership, cancel the auto-renew on your monthly subway pass, and put other expenses on pause that you won’t be using. Delay future travel, events, and large purchases until things become more clear.
It’s also smart to schedule a weekly “money date” with your finances to review spending, account balances, and plan your household budget for the next month.
Don’t have a budget? This could be a great time to set one up.
Rely on emergency savings instead of credit.
If you stashed a few months worth of paychecks in emergency savings, and you’re wondering when you’ll ever use this money, the time is probably now.
Need extra groceries, medical care, or the ability to stay afloat while you’re quarantined at home?
It’s better to rely on cash in your savings account than pile up credit card debt for unexpected expenses.
Adding debt now could result in greater financial stress later, like a larger-than-average credit card bill that takes months to recover from.
Choosing cash over credit (when possible) helps you minimize additional financial stress and stay on track with other goals, like retirement and buying a home.
Consider using FSA/HSA dollars for medical expenses.
If you save using a Flexible Spending Account (FSA) or Health Savings Account (HSA), this tax-advantaged money could be a great option to purchase things like...
- First-aid kits
- Nasal decongestants
- Most notably, medical care
Last week, the IRS issued IRS Notice 2020-15, which "provides flexibility to [health insurance providers] to provide health benefits for testing and treatment of COVID-19 without application of a deductible or cost sharing."
Check with your employer or your current health insurance provider to fully understand COVID-19 coverage and costs, especially as new information and guidance continues to emerge.
For an extensive list of eligible health care products and services, check out these two resources:
Some items - like hand sanitizer, face masks, and many OTC drugs may require a note from a physician to be eligible.
Stick to your financial plan.
What’s the best way to prevent Coronavirus from sabotaging your finances? Stick to your plan.
If you don't have a financial plan, here’s why it’s worth getting one.
- An emergency savings, AKA your safety net, helps you cover surprise expenses without relying on debt.
- A budget helps you track everything, so you can tell your income where to go and adjust when you need to (ahem, like now).
- The right health insurance plan means your family can get affordable medical care when they need it most.
- A strong investment portfolio is one built for the ups and downs of the stock market, keeping you on track during the good...and not-so-good times.
- A Financial Advisor offers guidance to help you make smart decisions that align with your overall financial plan.
About the Author:
Anthony is a Financial Planner for LearnLux who works virtually with clients located all over the United States. He particularly enjoys working with Young Professionals who are navigating important financial decisions for the first time. His approach is to offer practical advice & education that helps people feel confident about tackling their financial goals. Anthony calls Chicago home. When he’s not working, he enjoys exploring the city’s unique neighborhoods by train, bike, or on foot.
If you think you’re showing symptoms of coronavirus, which include fever, shortness of breath, and cough, call your doctor before going to get tested. If you’re anxious about the virus’s spread in your community, visit the CDC or up-to-date information and resources. Practice social distancing, wash your hands and reach out to our team using the form below if we can support you & your employees in any way during this challenging time.