If 2020 has taught us anything, it is to expect the unexpected. If this year caught you off-guard, (and how could it not?) then take the power back and prepare yourself for today and tomorrow.
We know that many of you may be facing challenges right now, from illness or unemployment, to mounting bills or missed mortgage payments, to even realizing the need to re-evaluate your financial plans. That’s why we worked with State Farm to share some tips you can try, to help you navigate this difficult time.
Talk It Out
This might be the hardest step in the whole process, but it also may be the most important one. Sit down with a spouse, partner or loved one and discuss “what if” situations. While conversations like this can be challenging, it’s best to have them when you are not immersed in one of those “what if” circumstances. Understanding each other’s hopes, fears and desires is incredibly important. Work through various hypothetical scenarios, like job loss, illness, childcare and even the death of a spouse or partner.
During this talk, be sure to include a review of your assets, like mutual funds, stocks and bonds, insurance and retirement savings. Make certain that your will and estate plan are current. Also, calculate your debts and income. Lastly, make a list of contacts, including family, friends, colleagues and employers. This info can be helpful in the event of an emergency or if you need to network due to job loss.
Save, Save, Save
From emergency funds to retirement accounts, let’s find ways to save. A general savings account at your local bank, credit union or online bank is best to work towards your short-term and long-term savings goals—consider setting up an automatic withdrawal from your paycheck to accumulate funds more easily and help you prepare for the future.
Build on these savings plans for financial emergencies, big and small. Whether you need to repair your car, find yourself unemployed or even experience a hospital stay due to COVID-19 or another illness, all of these are unexpected events that impact your finances. To avoid dipping into your savings or racking up major credit card debt to cover costs, establish two accounts, one for emergencies and one for unemployment. Automate the process to save a set amount each week. As a rule of thumb, you should save approximately three months of expenses for an unemployment fund and up to six months for an emergency fund. Make today the day you start to make these uncertain times work for you. Here’s a challenge: try to commit some of your “going-out money” to grow these funds for your tomorrow.
Now, looking further out, there are a couple of retirement accounts to check out, such as employer-sponsored 401(k) and 403(b) accounts or an individual retirement account (IRA) that you can open on your own. With an employer-sponsored retirement account that includes a company match, make sure you contribute enough to obtain the match. Don’t leave money on the table! Traditional and Roth IRAs have different advantages, including tax-deferred earnings, saving with pre-tax dollars or making contributions with after-tax funds, so you’ll want to do your homework and choose the best option for you.
Create A Plan
Now that you have discussed your desires and discovered the best accounts to help you save, write it all down. According to a State Farm “Financial Plan B” survey, only 45% of Americans have a backup plan to help their families weather a traumatic event, such as a job loss, a devastating illness or the death of a spouse or partner. So, stop procrastinating, design your Plan B and tell loved ones where you have it saved—a written plan can help family members take action right away in the event of an emergency.
This master document should have all of your personal accounts and financial info compiled for easy access, along with your medical wishes and a copy of your will. Yes, this looks like a lot, but take a deep breath and tackle each of these, one at a time. If you get stuck, there’s no shame in asking for help. Working with an accountant, lawyer, financial planner and insurance provider, like State Farm, can give you guidance and also assist with the paperwork. Plus, establishing relationships with these professionals now will be very beneficial to you and your family over time.
Ready to start your plan? Click here to connect with your local State Farm agent to talk about your financial goals for today and tomorrow.
State Farm Life Insurance Company (Not licensed in MA, NY or WI) State Farm Life and Accident Assurance Company (Licensed in NY and WI) Bloomington, IL