There is an old saying, with every great crisis, comes great opportunity. With our personal finances, it is not the actual crisis but the reaction to the crisis that has created tremendous opportunities for individuals to capitalize. Whether driven by the mispricing in the investment markets or decisions by our Government authorities, there are opportunities to take advantage of.
Below are a handful of tips that come to mind when handling your personal finance without a financial advisor.
Stay Invested & Reinvest In The Stock Market
In hindsight, this is easy to say. The stock market (as measured by the S&P 500 Index) is nearly back to even after cratering 30%+ in March. But this rebound has not lifted all boats. There are plenty of stocks still trading 20%+ below price levels seen prior to Covid-19.
Also, just as it is not natural for the stock market to drop 30%+ in a month’s time, it is just as odd to see it rise that amount in a matter of two months. We may get the chance to put some money to work on some stock market volatility.
Refinance Your Home Loan
The 10-Year Treasury Note has dropped below 1% this year. This has a direct correlation to mortgage rates. Translation, you can get a very low-interest rate on a home loan (new or refinance). With the amount of stimulus (funding) put into our economy, interest rates have precipitously dropped to levels not seen since… well, ever. If you can drop your existing loan rate a full 1% point, at levels that were already historically low, you should do it.
401(k) Early Withdrawal
No one wants to take money out of their tax-deferred investment account(s) until they have to (especially the IRS… since they penalize people who take it early).
But if you really need to you can do it penalty-free because of the pandemic… now is the time to do it. The Government has eliminated their 10% early withdrawal penalty from a 401(k)/IRA for people affected by Covid-19.
While your retirement accounts are meant for that, life happens and sometimes you have to pivot. If over the next couple of years, you foresee financial stress coming your way, taking an early withdrawal now is a good option to shore up your personal financials.
Defer Payments
This tip is a bit tricky as you have to be sure you are not being taken advantage of. If you called most financial institutions today and asked for some leniency on your loan payments (regardless of what they are for), they will give it to you. So, this is an option for you. But you have to be sure to understand the rules surrounding your deferment.
Most importantly, make sure you don’t have to pay extra interest payments. Outside of this, as long as everything else lines up, there is nothing wrong with deferring payments to help you during a time of crisis.
All four of these tips are designed to relieve financial stress, save you money, or even make you money. Take advantage of the ones that suit you and always be sure to think about how these financial decisions play out over the long-term. If beneficial, then they most likely are the right decision(s) for you. Overcoming your personal finance issues is not as difficult as you may have thought.
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