There has never been a year without twists and turns. But 2020 has been especially unpredictable, with the unfolding of circumstances that have directly affected the personal finances of most of the population.
No one anticipated that a pandemic that would throw millions out of work, or that subsequent legislation would (temporarily) alter many tax policies and authorize direct payments to millions of American households. No one expected the stock market to fall so precipitously (and faster than ever before) or to regain ground in such a remarkably short period.
All that to say, now is a good time — as we enter the second half of 2020 — for a personal financial review, including revisiting your 2020 budget and reviewing your investment plan.
Everyone’s situation is different
Just as the coronavirus has had a widely varying health impact — deadly for some patients, almost inconsequential for others — the financial impact has been varied too.
A friend of mine was laid off in April, a direct result of COVID-19. To make matters worse, he lives in a state where unemployment benefits have been held up by a bureaucratic boondoggle. He exhausted his "stimulus" check weeks ago and is now dipping into emergency savings to pay his rent and insurance. (Believe me, he can vouch for the importance of having an emergency fund.)
Another friend, meanwhile, has suffered no interruption in income. For her, the stimulus check was gravy. Further, she has enjoyed lower car-insurance expenses (her insurer discounted premiums because of reduced driving), and she has saved money by not eating out (restaurants have been closed). So in her case, the past several months have served to strengthen her financial position, not erode it.
What do my two acquaintances have in common? At mid-year, neither is where they expected to be financially.
What about you?
If your income and expenses over the past six months aren’t what you expected as you began the year, now’s the time to make adjustments if you haven’t done so already.
If your situation has worsened, you’ve probably been forced to make changes by now — perhaps trimming expenses and suspending/reducing ongoing investments. Just keep doing what you have to do to make it through this period. But as things improve, be sure to get back on track with your saving and investing. Commit now — and put it in writing — that when your income situation improves, you’ll make saving and investing an immediate priority. (You may also want to commit to retaining some of the expense-cutting you’ve learned how to do in recent months!)
If your financial situation has improved during COVID-19, have you taken steps to ensure that any additional surplus is used to move you closer to your financial goals?
I know of one family, for example, that didn’t "need" $2,400 in stimulus money. They decided to give part of it away (helping them to fulfill a goal of expanding their giving) and use the rest to speed up debt repayment (helping them move closer to their goal of getting out of debt). They made other changes in their budget as well (in light of slightly improved cash flow), enabling them to invest more in a retirement account each month.
You can’t "set it and forget it"
In some ways, it would be nice if finances were static — a "set it and forget it" thing. But that not realistic. Something is always changing, whether it’s tax withholding or the cost of groceries.
We’re not suggesting you obsess over every jot and tittle of your financial life, but being a wise and faithful steward does involve awareness and, when necessary, action. As Proverbs 27:23-24 says, using language suited to an agrarian culture, "Know well the condition of your flocks, and give attention to your herds, for riches do not last forever."
So as the last half of 2020 stretches out ahead, be sure you "know well" your financial situation. And, in light of what has unfolded over the first half of the year, make any necessary alterations — especially if you’re able to make changes that move you closer toward your goals.
Perhaps a few of the articles SMI has published this year (see column at right) will help.
What financial changes have you made because of the pandemic?
