Why now is the time to take control of your personal finances with Nav.it
By Emily Elmore | Mar 12, 2020
Global pandemics have a way of upending financial markets. Like people, the market dislikes uncertainty. Quarantines and travel restrictions disrupt supply chains and consumer spending, causing entire industries to take a sudden downturn.
When this happens, we anxiously look to governing organizations and business leaders as they make decisions that directly impact our pocketbooks. I have a high-risk tolerance when investing, and even I experienced a moment of panic as the DOW plummeted 1000 points within minutes of Monday’s opening bell. My angst was relieved when buying some of my preferred stock lower than it’s ever been. The market rallied. Then it dropped again. #Realtalk, I’m living on a merry-go-round of emotion.
And I’m not the only one. Is this the big recession we’ve been waiting for? How does this impact my money? What if my employer forces me to work during a health crisis? What can I do now to protect myself in the future?
First the disclosure stuff: I’m not a fiduciary and this overview is meant for situational awareness only. If you have questions about your specific situation, contact your financial institution or advisor.
OK back to big question: Are we all f**ked?
No! Coronavirus is scary because it’s new and we have no natural immunity. While the health community is working hard on a vaccination, the rest of us are left to wonder if we should be walking around in biosuits or taking advantage of 50% off cruise tickets.
The truth is that coronaviruses are fairly common and these symptoms are consistent with other upper respiratory illnesses. Caution and diligent hygiene ARE warranted to protect vulnerable populations like the elderly or anyone immunosuppressed. Once the newness of this thing wears off, the uncertainty swirling around the markets should settle, and we’ll be back to our regularly scheduled programming.
It also goes without saying – in times of crisis there are opportunities. We don’t mean 2 for 1 airfare. While some stocks tumble, others soar. As one virus spreads, others dissipate from improved hygiene. What other opportunities exist?
- We can review budgets and tighten up our spending.
- We should assess how we make money and determine how to make more, if necessary.
- We can start a side hustle from home…
- Or consider future side hustles: like renting your car or tutoring kids (especially if they missed school this year).
- We can acquire or share knowledge by taking that online course we’ve been eyeing, or by launching a blog, newsletter, or podcast.
Nav.it’s community and career groups can provide you with some great insight into how to launch a side hustle or optimize your bottom line with content generation.
Approach your finances based on Nav.it principles.
Our CEO Erin Papworth describes money management in three buckets: banking, debt, and investments. There’s nothing like uncertainty to encourage us to review all three.
During times of disruption, our savings and emergency fund can save our ass. Gig workers may suddenly find all non-essential public gatherings banned or school closures could force parents to take unexpected unpaid time off from work. We can’t control a volatile market, so your investment options may be limited, but paying down debt is a guaranteed return on investment because you always save on the interest.
Nav.it principles for basic financial health are all about (a) understanding your spending (b) building up an emergency fund and (c) paying down high-interest debt.
- Understanding Your Spending: Understand where you spend your money, determine what you can reduce, and consider how much more money you need to make… side hustle anyone?
- Build Up an Emergency Fund: There’s no time like a crisis to ramp up your savings habit and stash your cash. When it’s in a separate account you really don’t think about it until an emergency.
- Pay Down High-Interest Debt: If you can save extra, it’s time to think about getting that pesky credit card debt off your books. Since interest rates are dropping, look for a 0% APR credit card you can use to pay down your other cards (before the APR kicks in) or ask your bank for a personal loan at a lower APR that you can use to pay off high-interest debt. The key here is to make a plan on how you will repay all debt. This might be a good time to talk to a financial advisor who can help you with all this.
Summing Up Those Money Moves:
1. Review your spending.
2. Stash extra cash.
3. Pay off high-interest debt faster.
4. Think about refinancing your debt to a lower interest rate, either your mortgage or high-interest credit cards.
5. Don’t look at your investment accounts — unless you’re looking for an opportunity to buy low, and if that’s the case you need to talk with your broker or financial advisor.
How can I prepare myself for things like this in the future?
Diversification: From our podcast or from this great break down diversification of your investments is always recommended by experts. That means you have your cash in multiple investments, not just the stock market, which is always the first to take a hit when there is drama like this. Less-liquid assets like REITs (real estate investment trusts) or treasury bonds are typically what helps to offset equity market instability. While you can’t always prepare for the effects of a pandemic, you can create a stable equity environment by investing in stocks and securities across different sectors.
How does this affect my personal finances?
Keep calm and evaluate your portfolio: You may be concerned about a recession or the impact of the coronavirus on your personal finances. Try not to glue yourself to the TV and act on every headline. You might have to postpone your travel plans, and you are likely to consume a lot more Clorox products in the next few weeks. The market will correct itself but use this opportunity to evaluate your portfolio and consider opportunities available to you.
Take advantage of low-interest rates (and learn about the power of compound interest): When events like this happen, the Fed cuts interest rates to encourage borrowing and make lending more attractive. It’s a good time to think about refinancing your car, house, or high-interest debt (like credit cards) with lower interest loans. You can talk to a mortgage broker, a bank and your financial advisor for options and advice. Often this refinancing does take some cash upfront, so gather all the information and ask questions about fees and terms before you make your move.
I still have questions!
Our money mavens are on it. Our special coronavirus podcast is a great place to start if you want to nerd out on equity indexes, bonds, commodities, market correction, and recession indicators.
We’re changing the narrative around money but change can’t happen with a one-sided conversation. That’s why we’re excited to bring different voices and experts to share their wisdom. Send us an email and let us know what you think. And remember the nav.it money app offers you free tools for checking in and managing your money moves.
You can download it at Google Play and the Apple Store.