Is It Time to Reassess Your Financial Goals?

BLOG

Is It Time to Reassess Your Financial Goals?

Written by guest writer, Claudia E. Mott, CFP®, CDFA™, Epona Financial Solutions

The Coronavirus pandemic provides a unique opportunity to review your financial picture and perhaps make some changes that can be beneficial for the long run.   Spending habits have changed significantly over the past few months and whether you’ve earned a paycheck or not, as states begin to open up again and the opportunity to spend becomes easier, think about whether it’s time for a financial planning reset with some new goals.

Where Does My Money Go?

This is a perfect time to commit to using a tool or app that allows you to track your spending and really get to know what it costs you to live on a month-to-month basis.   Even better, would be to compare the last few months to a similar timeframe in 2019 to see where changes have taken place.  Many banks now have tools that categorize transactions coming into your accounts or there are apps like mint.com, youneedabudget.com or software such as Quicken that will provide similar capabilities.    What matters most is picking what works best for you and committing to using it.

Understanding cash flow—the difference between income and expenses, is the basis for being able to create savings strategies.    It’s likely that many categories are going to have changed substantially since March.  The decrease may be temporary such as commuting costs and paying for gasoline, but others, the discretionary categories like dining out and clothing, have also likely decreased and may not need to return to past levels.   These past few months have shown that we can live with a lot less than we are used to.

An Emergency Fund is Essential!

Whether you find yourself with extra cash flow or must cut back spending to create it, savings should always be a priority, but goals can differ based on age and stage of life.  However, everyone needs to try to set aside an emergency fund to cover the unexpected and unanticipated expenses that can occur.   During this difficult economic time, emergency funds have helped tide people over during interruptions in employment and income.   The amount needed for an appropriate emergency fund can range from 3 to 6 months of expenses for a two-income household to a year’s living expenses for those in retirement.   These funds should be held in a liquid account or perhaps a CD-ladder to earn a little interest, but should not be invested and exposed to market risk.   If you have taken the time to understand your monthly cash flow needs, you have got the basis for determining how much should be set aside for an emergency fund.

Chip Away at the Credit Cards

Another good use of excess cash flow is to pay off high interest debt like credit cards or private student loans.   Adding more to the payment than the required minimum or making an extra payment or two throughout the year will help shorten the payoff timeline and save on interest expenses.   Once these debts are cleared, the payments can be directed towards a new savings goal.

It is Never Too Soon to Save for Retirement

Planning for retirement is the most important long-term savings goal for any individual and one that often gets put off for far too long.   Pre-tax savings through an employer sponsored retirement account like a 401(k) or 403(b), or an individual account such as an IRA or SEP-IRA are the primary vehicles to accomplish this.   For 2020, the maximum that can be contributed by an individual to a 401(k)-type plan is $19,500 with an extra $5,000 catchup for those over age 50.   IRA accounts have a contribution maximum of $6,000 with a $1,000 catchup.   Do not pass up the opportunity of free money by not contributing enough to a 401(k) if your employer matches a portion of your contribution.    During the process of reassessing spending and savings goals, make sure that retirement planning is a priority if there is cash flow to fund it.

Erin D. DeGeorge
Erin D. DeGeorge joined DeTorres & DeGeorge, LLC as partner to the firm in June of 2010. Prior to joining DeTorres & DeGeorge, Erin was associated with the national firm of Fox Rothschild LLP and Cutler, Simeone, Townsend, Tomaio & Newmark, LLC...
Share on:

knowledge & insights

Man in military uniform removing ring

Is military divorce the same as regular divorce?

Military divorce couples file for divorce using the same process that civilians use; however, when military couples divorce there are factors that have to be considered separate from routine divorce situations. While there are many similarities among a military divorce and divorces involving...

February 21, 2024 Read More

Bird house hanging from tree branch

What is bird nesting divorce?

A bird nesting divorce, also referred to as bird's nest custody, or bird nesting, is a living arrangement that allows for the children to continue to reside in the family home while the parties take turns living in the home. Bird nesting divorce is intended to keep the primary burden of the divorce...

February 13, 2024 Read More

Model home held by 2 hands

Co-owning a house after divorce

Co-owning a house after divorce, and divorcing with a house in both names, is an issue that arises when people divorce and own a home together.  Couples have to decide whether they will continue to co-own their home after their divorce.  When parties own a home and are going to divorce, the home...

February 3, 2024 Read More

Divorce: The Answers you Need – Before, During & After

Download our eBook today!

  • This field is for validation purposes and should be left unchanged.

Newsletter

  • This field is for validation purposes and should be left unchanged.

follow us
Top