No one expected that 2020 would bring with it a global pandemic. As a result of the coronavirus crisis, we’ve seen increased volatility, drastic market lows, and rising unemployment numbers—and we still have a long way to go to normal. Not surprisingly, many people are struggling financially or worried about their money.
There’s so much out of your control, but 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 is 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 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 IRA distributions.
5. Seek Help From A Financial Professional
During these more-than-uncertain times, it can be stressful trying to figure out how to grow your wealth. With all that’s going on in our world, you have enough to worry about. Consider connecting with a trusted financial advisor who can help you create a step-by-step plan for protecting and growing your wealth today.
T.A. Holland & Co. is a financial advisory firm 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. Reach out to us at email@example.com or 617-523-5656 to schedule a complimentary appointment so we can get to know each other.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
About T.A. Holland & Co.
T.A. Holland & Co. was founded in Boston, Massachusetts, in 1920 and serves individuals and businesses throughout the country with their financial needs. We provide cutting-edge financial services with a broad array of solutions to help our clients grow and preserve their wealth. We have seen good and bad economic times. Throughout it all, T.A. Holland & Co. has thrived by always making the customer our number-one priority. We get to know you and understand your needs so we can provide you with the proper guidance and strategies. Our senior vice president, John Hellmuth, has been at the helm of T.A. Holland’s financial services since 1990, but he doesn’t do this job alone. He is joined by his two children, Lindsay Hellmuth and Thomas Hellmuth. As CERTIFIED FINANCIAL PLANNER® (CFP®) practitioners, our financial services team has the knowledge and experience to help you solve your most pressing financial challenges. To learn more about how we can help you, visit our website and reach out to us to schedule a complimentary get-acquainted meeting.