Even multiple months after its introduction, COVID-19 is still wreaking havoc across the globe. Although some states and counties are reopening and some restrictions are lifting, we still have a long way to go to normal. As a result of the coronavirus crisis, we’ve seen increased volatility, drastic market lows, and rising unemployment numbers. Understandably, many people are still struggling financially or worried about their money—among other things.
There is so much out of your control right now, but you are not completely powerless. There are ways you can be proactive about your finances and make the most of this time. Let’s look at 5 strategies you can use today to leverage the 2020 financial crisis and grow your wealth.
1. Reevaluate and Reposition Your Finances
A financial crisis is the perfect time to go back to the drawing board and reevaluate your current financial situation. Did you realize your emergency fund is too small? Is there more risk in your portfolio than you’re comfortable with? Do you have more debt than you should?
Take a hard look at your finances to identify ways you could save money—either now or in the long run. For example, now can be an ideal time to:
- Refinance your mortgage to a lower rate. Interest rates have fallen back to a historic low. As of June 1, 2020, the average APR for a 30-year fixed-rate mortgage is 3.378%. (1) If you’re looking to cut your mortgage payment, call up your lender and see if you qualify for refinancing. Just be sure to factor in closing costs, which could eat into your savings.
- Take out a life insurance policy (or increase your current coverage). If you’re like most people, the coronavirus pandemic has you thinking a lot about life insurance. The good news is, it’s not too late to apply and lock in a low rate if you’re healthy. Life insurance rates are largely tied to interest rates and the market, so buying now while rates are low could be a good way to secure your family’s financial future. (2)
2. Stay in the Market
Investing seems like the last thing you want to do right now. I get it. But if you really want to grow your wealth, you need to consider investing. Investing is not about timing the market, it is about time in the market. Over the long run, stocks grow your wealth. It is just hard to see when you are looking at it day to day.
If we look back at the 2008 financial crisis, we see that stocks fell by more than 50%. (3) But the market began to bounce back in 2009. Those who persevered saw their portfolios regain their original value in two years and reach all-time highs in 2019.
We’ve had 12 bear markets since World War II. (4) And guess what? We recovered from every single one of them. I can’t say when a stock has hit its high or low. But I do know that, while past performance cannot guarantee future results, if you’re patient and keep on investing, the market should recover again and you will not have missed it.
3. Check your Risk Tolerance
But what if you’re retiring soon and this financial crisis has made you realize you’re too heavily invested in stocks? In this case, it could be a smart move to re-check your risk tolerance and possibly adjust your investments to reflect how much volatility and risk you are willing to take.
4. Find Ways to Save on Taxes
Growing your wealth doesn’t necessarily mean making more money. One of the most efficient ways to maximize your savings is to minimize your tax burden. Fortunately, there are plenty of strategies you can use to legally reduce your tax bill.
Some strategies I use with my clients include:
- Contribute the maximum amount to your tax-advantaged retirement and HSA accounts.
- Use deductions to reduce your taxable income and credits to reduce your tax bill.
- Consider tax loss harvesting while you are repositioning your portfolio.
- Use charitable donations to minimize the financial impacts of required minimum distributions (RMDs).
5. Seek Help From a Financial Professional
It’s safe to say that just about everyone is experiencing stress of one kind or another during the 2020 financial crisis. You have enough to worry about, so consider connecting with a trusted financial advisor who can help you create a step-by-step plan for protecting and growing your wealth today, no matter the circumstances.
Sawchuk Wealth is a financial advisory firm that’s dedicated to helping you weather any financial storm that comes your way. Whether you need help managing your portfolio, creating a financial plan, or minimizing taxes, we’re here to help. Get started by scheduling a call online or calling 248-269-9700. We look forward to hearing from you!
Terry Sawchuk is the founder, chairman, and financial consultant at Sawchuk Wealth, a comprehensive wealth management firm that is devoted to helping successful families and businesses live their best financial life. With over 30 years of industry experience, Terry spends his days helping clients pursue their financial and lifestyle goals, work toward a work-optional lifestyle, and navigate through the critical financial events of their lives. Terry’s business philosophy remains the same as it has been from the beginning: to build long-term relationships based on trust. Terry holds the NSSA (National Social Security Association) certification, as well as his Series 6, 7, 24, 63, and 65 securities registrations. In the Metro-Detroit area, Terry Sawchuk is a well-recognized name, as he was a prominent personality on radio and TV as the host of Wealth Strategies on WJR for many years, as well as a co-host of Real Estate and Business Insiders on the local ABC affiliate. Terry is a staunch advocate of the mind–body connection and is passionate about regular exercise and healthy eating. In his spare time, Terry is an avid golfer and a big University of Michigan fan. In Terry’s mind, the best thing he can do with his time is to spend it with his beautiful wife, Amy, and their five children. To learn more about Terry, connect with him on LinkedIn.
(1) Nerd Wallet
(2) Business Insider
(3) The Balance