The top five financial moves you should consider right now

A lot of us are feeling a little anxious about our finances these days — and for good reason. According to Haven Life’s recent COVID-19 Financial Impact Survey, 61 percent of respondents saw some decrease in household income as a result of the coronavirus pandemic. Even more people could see their income change if the economy heads into a recession. If there’s one thing we know about life right now, it’s that we don’t know what’s coming next, especially when it comes to financial planning.

That doesn’t mean we should stop making smart financial decisions, though. Just because we aren’t sure what the next few years might look like doesn’t mean we can’t start preparing for whatever those years might bring, good or bad. If you’re wondering what you should be doing with your money right now, here are five financial tips that will help you get your budget, your savings and your investments in good shape for the future — no matter what happens.

Take control: Know where your money is going

The first move financial experts suggest — if you haven’t made it already — is to take a good look at where your money is going.

“The best thing to do to get prepared is to know what your finances look like,” says Betty Wang, CFP®, founder and president of BW Financial Planning and advisor at the XY Planning Network. “It’s basic math: How much you earn, how much you spend, how much you save and invest.”

Once you know how your earnings stack up against your spending, saving and investing habits, you’ll be better prepared to make smart financial decisions. If you want to take control of your finances, Wang explains, you have to start by understanding where your money is going right now. From there, you can ask yourself whether it’s more important to earn more, spend less or put more of your income towards savings and investments.

Taking control of your personal finance plans also gives you the power to adjust your priorities as if your financial situation changes. “When the unexpected happens, you can pivot,” Wang says.

Reassess your budget: Does your spending match your values?

Now that you’ve taken a close look at where your money is going, the next personal finance tip is to evaluate what you’ve learned. Start by examining your spending: do your purchases match your values, or do you buy a lot of stuff that doesn’t really add much to your life? Haven Life’s study, for example, found that 80% of Americans plan to change their spending habits to try to save more.

In some cases, it’s easy to identify which expenses to cut in order to improve your personal finance plan. For example, you might be paying for streaming services that you never use, buying clothing you never wear and so on. If you can remove that kind of spending from your budget, great. You will be one step closer to reaching your financial goals.

That said, many of us will have to do the more difficult job of trimming our budget while still leaving room for the purchases that make life enjoyable. Here are some of Wang’s top budget-trimming tips:

• Save money on groceries by meal planning before you shop.
• Subscribe to just one streaming media service — whether you choose Netflix, Hulu, Disney+, YouTube TV or Amazon Prime Video, you’ll find yourself with more movies and television shows than you could watch in a lifetime. Get tired of that channel? Pause the subscription and switch to another one.
• Cut your entertainment budget even further by borrowing books, movies, games and more from your local library. (Technically, you already paid for them, assuming you pay taxes.)
• Wait 30 days before making any large purchases. By giving yourself the chance to reconsider, you might discover that you don’t really need (or want) the item in question.
• Increase the deductible on your home or auto insurance. “If your deductible is at $500, I’d look at increasing that to $1,000, depending on your circumstances,” Wang advises. The money you save on your monthly premiums can go straight into your emergency fund.

Automate your savings: What you don’t see, you can’t spend

If you want to save more money, Wang suggests that you automate your savings. Most online banking programs make it easy to create automatic savings transfers, which means that you can stash a portion of every paycheck directly into your savings account. “You don’t see it, so you don’t want to spend it,” Wang explains.

You can also use budgeting apps like Qapital to automatically transfer money to your savings bank account or investment accounts. And, while we’re on the subject of investing, remember that one of the best ways to increase your savings is to contribute enough money to your 401(k) that you get the maximum employer match.

When creating a financial plan, Wang suggests trying to save 20 percent of your income, if possible. If that feels like more than you can afford right now, start smaller and try to increase your savings percentage every year. Raises and bonuses give you excellent opportunities to bulk out your savings without having to cut back on your spending. Consider opening a high-yield savings account to get the most out of every automatic transfer, and remember that you can always cut back on your savings rate in the future — so why not set an ambitious savings goal and see what happens?

Plan for the unexpected: Get your financial house in order

Once you’ve got your spending and saving habits under control, another sound piece of financial advice is to start preparing for the unexpected. If you save three-to-six months’ worth of expenses in an emergency fund, for example, you’ll be prepared for everything from a period of unemployment to a last-minute car repair to help with unexpected living expenses. Saving enough money for emergency situations will help you achieve financial freedom while also allowing you to stay prepared.

It may also be time to take out a term life insurance policy, if you don’t already have one — because if you have people who depend on you financially, you need life insurance. A good life insurance policy can help your loved ones cover funeral costs, pay off debt, continue making mortgage payments and more. Life insurance is an essential component of your family’s long-term financial security and is even more important during a recession. So, use a life insurance calculator to determine how much coverage you might need, and get a life insurance quote to see how easily an affordable term life policy can fit into your budget.

You should also consider creating a will and, potentially, a revocable living trust — not only to specify how your assets should be distributed after your death, but also to designate a guardian for your minor children, provide for loved ones with special needs, transfer ownership of a small business and more. Wills and trusts are indispensable estate planning tools, and key elements of a strong financial foundation.

Invest for your financial future: Use the market to build wealth over time

The last step on your financial checklist involves investing for the future — and yes, you should consider investing even when the market is volatile. “It can still be a great time to build wealth,” Wang says

Once your money is in the market, whether through an IRA, 401(k) or independent brokerage account, the goal should generally be to keep it there for as long as possible. If your risk tolerance permits, remember to invest with a growth mindset, especially if you still have years to go before retirement — and let your investment portfolio be the capstone of your solid financial foundation. Plus, if you leave money in the market, it has the potential to grow considerably over time.

With 80 percent of Haven Life survey respondents currently rethinking how they plan for the unexpected, these five financial tips can help you re-evaluate your own financial situation and begin creating a plan of your own. Start by looking at where your money is going, then focus on cutting unnecessary expenses, automating your savings, protecting your loved ones and preparing for your financial future. By spending a little time on your finances today, you can start planning for whatever tomorrow might bring — whether it’s everything you hoped it would be, or something you never could have anticipated.

Survey methodology: Haven Life conducted a quantitative survey between April 17 – April 21, 2020 and collected N=556 completed responses. Respondents were required to be between 23-55 years old. The median age of respondents was 34 and the median household income was $70,000. Seventy-two percent of respondents were either married and or had children.