By Alan Becker
Among the many devastating problems the COVID-19 pandemic caused was this: Plenty of Americans were left fretting about the state of their finances.
In a Pew Research Center survey, about half of non-retired adults said the pandemic’s economic impact will make it harder for them to achieve their long-term financial goals. Among those experiencing a financial struggle, 44 percent estimated it would take them three years, maybe more, to get back to where they were before the pandemic. Another 10 percent are even more pessimistic, saying it’s possible they will never recover.
These are sobering results, though perhaps not surprising. We all watched over the last year as portions of the economy shut down while our country did battle with the virus. Small businesses closed, some never to reopen again. Employees were told their services were no longer needed, and they went from drawing a regular paycheck to dealing with the frustrations of trying to draw unemployment.
For many people, savings plans took a hit. That Pew Research survey showed that 31 percent of savers had reduced the amount they save. Among lower-income Americans, 47 percent cut back on their savings.
As a nation, we do see brightness ahead as Americans become vaccinated and the economy begins to right itself. What’s done is done, though, and those whose finances took a major blow must now figure out how to stabilize themselves and get back on course.
Here are a few tips for doing so:
- Make a plan. Figure out where your finances are right now. Look at your monthly expenses and your monthly income and see how they stack up. Are there ways you can cut back on expenses. Of course, that may mean making sacrifices, a hard ask since you may have sacrificed so much already in the last year. Indeed, 42 percent of the Americans that Pew Research surveyed said they are spending less money than usual since the pandemic began. But you can feel more confident going forward if you write down a plan that outlines where your finances are, where you would like them to be, and what steps you need to take to get there.
- Begin saving again as soon as you can. One of the most insidious aspects of financial struggles is that they beget other financial struggles. You can’t pay this month’s electric bill, so you charge it to a credit card, which means now you are paying that bill off with interest, which means it’s even harder to save for retirement or emergencies. But saving is important, and the sooner you can get back to doing it regularly, the better, even if it’s just a small amount to begin with. One of the best ways to save is if your employer offers a 401(k) plan where your contributions go directly into your account without you ever touching the money. This is even better when the employer offers a company match, free money that boosts your savings even more.
- Consider postponing retirement. If you were forced to reduce your contributions to your retirement savings – or worse, had to dip into those retirement funds to meet monthly expenses – it might be a good idea to take another look at your retirement timeline. Perhaps it would be wise to postpone retirement a few years, giving you more time to build back what was lost.
- Review your Social Security options. When you close in on Social Security age, you have decisions to make. The pandemic may have changed what you want or need to do. You can take your Social Security benefit early, at 62, but that means a reduced monthly check for the rest of your life. You can wait until your full eligibility age, which for most people is 66 or 67. Or you can put off claiming Social Security until age 70, and be rewarded with a bigger monthly check. Perhaps pre-pandemic you had your Social Security plan all figured out, and possibly that plan still works. But it also could be time to review where you stand. If you lost your job, taking Social Security early may now make sense just to bring in some income. If you decide to keep working beyond the date you originally planned to retire, maybe you will want to postpone Social Security as well.
If you can meet with a financial professional, all the better because they can home in on the specifics of your individual situation to devise a tailored plan. But regardless, as difficult as it is, don’t let emotion rule your decisions. Stay focused on what you can do, put your plan in gear, and with patience and fortitude you can begin to mend that financial wound.