5 Ways to Take Control of Your Financial Life in Uncertain Times

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By Eric Hutchinson, Vice President, Goldman Sachs Personal Financial Management

Trying to save money and pay down debt can be hard to do even under normal circumstances. But these goals can suddenly seem insurmountable in the midst of a global health crisis – a time when the world is undergoing so many drastic changes. Most of which are out of our control.

Jittery markets combined with fears of a prolonged recession may have shaken your confidence in reaching your financial goals. If you have a financial plan, this may be a good time to revisit or rethink the details of your plan.

For those who have not given much thought to financial planning, this crisis has probably been a wake-up call. A well thought-out financial plan can help give you a peace of mind and a greater sense of control over your finances – even in times of uncertainty. It’s never too late to start: You can have that conversation now with a professional advisor.

When it comes to financial planning, no two plans are going to look exactly alike because everyone’s situation is different. Details are going to be shaped by an individual’s particular circumstances and goals.

That being said, there are some basic principles of financial planning that can help you get your financial house in order. With so much uncertainty surrounding the economy, there’s no better time to review the basics of how to take control your finances. Let’s dive in!

1. Build an emergency fund

Saving money while trying to pay bills and deal with debt at the same time can feel like you’re pushing a boulder up a steep hill. But you can do it! The first step towards any financial goal is probably the hardest step to take. That’s because sometimes we like to think up of all the ways why something won’t work rather than just simply starting.

When it comes to building an emergency cash reserve from scratch, you start where you can start. Every little bit helps – even if you’re just throwing in a dollar a day at the beginning.

The key is to set a personal goal that makes sense for you. Perhaps, you want to start with a modest goal of $500 so that you can at least cover the cost of basic repairs if your car ever breaks down.

You may want to open a savings account, so that you can keep your cash reserve in one accessible place (and earn interest to boot). You may also consider setting up automatic deposits from your checking account each month. This way you’re automating your savings habit – one less thing for you to remember to do.

When you reach your $500 goal, keep going! Let it motivate you to continue building up your reserve.

Generally, you want to have enough money in your emergency cash reserve to cover at least three to six months of living expenses. This goal may take time, but it’s achievable if you remain diligent.

Knowing that you can handle an unexpected expense or event (e.g., medical procedure, job loss, etc.) can help you build confidence and give you a sense of control over your financial well-being. 

2. Start saving for retirement

We all may dream about retirement and what we would do after we “clock out” for the final time. But many of us may not spend as much time thinking about saving for retirement.

The sooner you can get started on your retirement savings, the better. It gives your money more time to grow (or compound) over the years.

If your employer offers a 401(k) plan, you can start making regular contributions towards your retirement savings there. If they offer to match your contributions, even better! Just make sure you’re contributing enough to qualify for the match. For the 2020 tax year, the IRS allows you to contribute up to $19,500 to your 401(k) plan.

While you may not be able to make the maximum annual contribution right away, this is a goal you can gradually work towards. For example, if you expect to get an annual salary bump, you may want to automatically increase your contributions each year.

If you don’t have access to a workplace retirement plan, you can also look into opening an IRA (Traditional or Roth). This would be your personal retirement savings account where you can make regular contributions. Just as you can automate deposits into your emergency savings account, you can also set up recurring deposits to your IRA. Consider automatically contributing a portion of your paychecks to your account.

If you have specific retirement goals in mind, this may be a good time to reach out to a financial advisor to discuss how you can reach those goals.

3. Pay down debt

Debt is a burden – not only in the financial sense but also psychologically. Carrying around high-interest debt (typically anything over 8%) is stressful and can cramp your budget. If debt payments eat up a chunk of your budget every month, that’s less money you can put towards something else (e.g., savings).

There are a few ways to tackle debt.

You may have heard of the “avalanche method” where you target and knock out debt with the highest interest rate first (while making the minimum payments on other accounts). This can help reduce the total amount of interest you pay over time.

You may have also heard of the “snowball method,” where you focus on paying off the smallest debt first. This method is designed to motivate you to tackle your debt one by one until they’re all paid off.

The snowball method is more about psychology than math. Paying off one small balance first should give you the motivation to tackle the next account that’s on your list. The idea is that your progress would encourage you to keep going until all debt is paid off.

Setting up automatic payments can also be helpful when it comes to debt repayment. This way you can help ensure you’re making your monthly payments on time.

4. Write down your goals and make a plan

On any given day, we probably have dozens of thoughts swirling in our head. And until we put them down on paper, they’re simply just . . . thoughts or aspirations. If you have financial goals you want to achieve, write them down and make a plan.

Why? Because if you don’t have a plan, you’re planning to fail. Without a financial roadmap, it can be easy to wander off course, lose motivation and forget where you wanted to go in the first place. In other words, a financial plan allows you to be in the driver’s seat when it comes to your financial future.

A plan can start with something as basic as a monthly budget, which can help you understand how you’re spending your money and identify areas where you can save. Remember, every little bit helps.

Saving money and paying off debt at the same time can be done, but it does take planning, discipline and patience.

5. Ask for professional help

If you’re new to financial planning, this may be a good time to consider getting in touch with a professional for help. Financial planners can work with you to identify financial priorities, review your financial situation and create a long-term plan to help you reach your goals.

For those who already have a financial plan, this may be the time to connect with your advisor to revisit or rethink your goals. The pandemic has likely prompted many of us to reflect on how we want to live our life, pushing us to re-evaluate our financial priorities and goals.

Changes in our routines and lifestyle may have helped some of us to see the potential benefits of living a simpler (or more frugal) lifestyle. Perhaps, there are certain changes in your spending that you’d like to try and maintain even after the crisis ends.

Creating or managing a financial plan on your own can seem daunting. But this isn’t something you have to do on your own. As financial planners, it is our job to help you come up with a plan and guide you on your financial journey. 

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United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.

The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.

Information and opinions expressed by individuals other than GS PFM employees do not necessarily reflect the view of GS PFM. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.

Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA, which is an affiliate of United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management