Show Notes for this Episode:
The economy has been hit pretty hard with the aftermath of the Coronavirus pandemic. We don’t know exactly what this “new economy” is going to look like on the other side, but I’ve been thinking a lot about this.
Millions of jobs have been lost, and many of those will likely not be replaced. People are also not spending as much and becoming more frugal. We’ve been learning how to social distance and how to work virtually from home. We’ve also become more aware of our health and keeping germs at bay.
At this point given the drop in GDP growth and the number of jobs lost, we are in a recession. What we don’t know is how deep the recession will be and how long it will last. The Fed and Congress have been pumping money into the system which I believe will help to cushion the blow.
How will all of these things change our economy going forward, and how can you position yourself for success in the new economy? That’s what this episode is all about.
Here’s what you will learn in this episode:
- Why now is the time to get control of your spending
- What debt you should be paying down and what debt to consider refinancing
- Why now is a better time than ever to put money into investment and retirement accounts
- Why a financial reset is imperative and how to do this
- What your #1 investment should be
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(00:01): We're beginning to enter into a new era, a new economy. What kind of economy can we anticipate going forward? We know that things will be different after we get through this Corona virus pandemic, but exactly how they will change. We don't know. This is what I've been thinking about lately and I'll be sharing some tips with you on today's show for how to position yourself for success as we come out of the coronavirus pandemic.
(00:43): Welcome to the podcast.
(00:46): I'm Stephanie Sammons, an experienced certified financial planner helping women professionals navigate midlife and money. Well, the new economy has arrived whether we were ready for it or not, it's here. Everything
(01:13): has changed and we've been through some tough times, no doubt about it. Um, it's still tough. It's still heartbreaking on many levels, what people are going through in our country and around the world. But as we start to get on the other side of this and we are beginning to see the silver lining, the light at the end of the tunnel here, we really do have to think about how things are going to be different going forward and what should we be doing to stay adaptable and flexible and smart as we come out on the other side of this pandemic. How can you prepare for this new economy so that you're in the best position possible to prosper now and in the future? So these are the things I've been thinking about and I wanted to share with you on today's show some midlife money moves that you can take advantage of to reposition yourself and really be as prepared as possible for what's ahead. I have seven money moves that I want to share with you and here we go. Number one, tighten your wallet.
(02:46): I really want you to be smarter with your spending. When we are in a prosperous economic environment environment like were just literally a few months ago, it's pretty easy to become more frivolous and not think so much about where every dollar is going, but now is a time to be smarter about that. Now I'm not one to believe in saving so much that you deprive yourself from the things that bring you joy today. I think you have to strike a delicate balance between you're spending now and you're saving for the future, your retirement for example, and the reason I believe that way is because life is short and we never know when it's going to be. Our time, and this pandemic has most definitely reminded us of the value of life and how precious life is and how precious every moment that you are alive is every moment counts.
(04:11): By tightening your wallet, you can align your spending more with your values. Every penny counts in retirement when you are no longer working and earning an income, every penny counts. When you lose your job, you have to think about these things and one of the ways to really get smarter about your spending is to focus on your needs, not your wants. And with every spending decision you make, ask yourself, do I really need this? You know, can I live without this? Am I just buying this because I'm bored? Take yourself through that questioning process. When you spend money and the money that you don't spend, you will be able to redeploy and do other things with that. I'm going to talk about in this episode. So number one is tightened your wallet. Number two is kind of related to number one and that is declutter.
(05:32): And here I'm focused again on stuff that maybe you have accumulated that you really don't need, you don't utilize and it's just taking up space in your home and in your life. What can you donate and give away to others who are in need? What can you sell? I'll give you an example for me. I have multiple guitars that I have purchased over the years that are in cases in a closet, meaning I never pulled them out or I very rarely pull them out. And the reason is because I have my favorites, I have my GoTo guitars and yes, it's still plural. This is my number one hobby slash interest. Slash. Passion. So I do play two, three guitars on a very regular basis and I actually placed them in different rooms in my house because when, when I see the guitar, I go pick it up and I pluck around on it.
(06:48): It's fun for me and it's, it relieves stress for me. It's very therapeutic. But again, I have a handful of guitars that I could sell, I can donate and I also have a lot of music equipment, recording equipment, microphones, things of that nature that are just taking up tons of space in my home office. So think about the things that you can get rid of. Um, also this goes for your closet and your clothes and your shoes. What are the things that you haven't worn in a year? Some people say do that with the six month test. Have you worn something in six months?
(07:45): I can think of a lot of items of clothing and shoes that I have not touched in a year, so that's, that's my next goal to tackle my closet. Declutter. It will free up space in your home. It will free up space in your brain. It will make you feel good. It's spring time. It's a great time to do it. Spring cleaning, you're at home anyway. Most likely as as most States are just beginning to open up. Our economy is just beginning to start going again and figure out maybe what you can provide to others who are in need and the process. So number two, declutter.
(08:29): Number three, boost your emergency fund. Now you probably hear most advisors and financial experts preaching about this, but be careful about rules of thumb when it comes to how much money you should keep in an emergency fund because it really depends on your personal situation. It depends on how much you spend, what your ongoing monthly expenses are. It depends on your job. Security, depends on your age, how close you are to retirement, what your earnings capacity is, so on and so forth. So don't necessarily rely on any one rule of thumb here. It could be that you need three months of your living expenses in savings in an emergency fund, maybe you need six months, maybe you need 18 months and maybe if you are very close to retirement or already retired, you need more than that up to two years, up to three years.
(09:38): Depends depends on your comfort level, but if we've learned anything in this pandemic that brought our economy to a screeching halt, it is the value of an emergency fund just in case you need it. Number three, booster emergency fund number four, pay down or refinance debt. If you use credit cards and you don't pay them down every month, that is where you want to get to. You really want to get to where you don't carry credit card debt and the reason is because it's very, very expensive money. You're much better off not using credit cards and just paying for things that you can. On a cash basis. I understand in some cases you have to use a credit card or maybe you have a credit card where you earn miles or points or something like that. The goal is to pay down your credit cards in full every month and if you aren't at that point, try to get to that point.
(10:58): If you have outstanding credit card debt, start chipping away at that and ultimately get rid of it. Now what about mortgage debt? The mortgage loan you have on your house, if you own a home or if you own a home and an investment property and you have any outstanding mortgage loans. This is also really a personal decision and it depends on where you are, what life phase you are in. If you're close to retirement. It also depends on current interest rates and right now interest rates are extremely low. Mortgage rates have been falling. If you have an outstanding mortgage on a property and you can save at least a half a point on that mortgage, then it probably is worth refinancing, especially if you plan to stay in the house a while, as in five years or so. You need to run the numbers on that to see if it makes sense because you will most likely incur closing costs and you want to be able to get the value out of paying those closing costs by staying in your home long enough. So pay down your debt and refinance your mortgage if it makes sense to do so.
(12:31): Number five, increase your savings into investment or retirement accounts. Now, if you are tightening your wallet and you have shored up your emergency fund, you have plenty of cash on hand in a savings account and you start finding that you do have extra money to put away. There's never been a better time to get that money invested. Add to your investment accounts, add to your savings account, and also assuming that you've paid off your credit card debt. If you haven't done that, you want to apply this extra money toward credit cards first.
(13:19): The best way to increase your savings and investment in retirement accounts and other accounts is to dollar cost average and that's basically where you set it and forget it. You choose your monthly amount that you're going to contribute and you set it up to go into your investment account or into your retirement account automatically. That way you don't even have to think about it. It's kind of like paying a bill except that you are paying yourself first and you are paying yourself to secure your future financial life. That's a great thing. By the way, next week I'll be going through what the new retirement plan contribution limits are. An options are for 2020 I will also touch on what those limits are for 2019 because since the tax filing deadline has been pushed out to mid July, you can actually still make contributions for last year 2019 so take advantage of the opportunity to start investing and boosting your investment in retirement accounts.
(14:41): Now if you have the cash to do so, if you have the money to do so. Number five, increase your savings into investment or retirement. Number six, reset your financial plan. Has your vision for your future changed at all as a result of this pandemic? Have any of your life goals changed? Are you thinking a little bit differently? I know for me personally, this experience has helped me remember what my values are, my true values, my true core values, and when we are busy and stressed and always on the go try to juggle everything in life, it's easy to get away from that. So it's been really nice to be able to remember what my values are and start reclaiming those values and make some life changes that align with my values. And maybe you have had this same experience or this same revelation.
(16:02): maybe this extra time or this time being sheltered in place has allowed you to realize that you aren't happy in your job, for example, or maybe even unhappy in your relationship. And I hate to say that, but it's happening. When you're all of a sudden forced to spend 24 seven together with your partner or your spouse, there will be some divorces that come out of this. Unfortunately. Have you found a new hobby or an interest that you are enjoying spending time on? Are you creating and enjoying more time with your family? More life balance. It's very possible that all of these things have changed for you and that your vision for the future may look different now. So I want you to think about resetting your financial plan to where you are now and the way you are thinking about what you want your future life to look like.
(17:19): And this also includes resetting your investment plan and your financial assets and actions so that these things align with your values and your vision and your goals. So I would clean the slate on any financial planning you've done in the past and start fresh and I think you will find it to be a really enjoyable and valuable exercise. Number six, reset your financial plan. Number seven, invest in you. Now is the time to build on your strengths and prepare yourself for this next wave that we're entering into, which is going to be a more digital or virtual and more tech savvy economy may not be that tech savvy and that's okay, but I'll tell you something. My dad recently purchased my mom a brand new Mac book air. My mom is 77 and this was completely foreign to her, this piece of equipment, but she is having such a great time learning how to use a Mac book air.
(18:49): She's learning new things every day. She's engaging her brain, she's spending time on it. He's been helping her. I've been helping her. My sister has been helping her, but it's really cool to see and she is loving becoming more tech savvy and the more time she spends on that laptop, the less intimidating it becomes. If my mom can do it, anyone can do it, you can do it. Don't be afraid of technology. What specialized skills can you develop now? Can you start working on, while you have this time at home, are there some classes that you can take online? Is there a certification that you can acquire that can help you in your field and in your industry and make you more competitive? Now is the time to get smarter so that you can create more opportunities for yourself as we go into this new economy. And I will be doing the same. So number seven is invest in you.
(20:06): Yes, things have changed. They are changing before our eyes, and ultimately I think it's for the better. In some ways, we've had a major, major setback, but it's also an opportunity for reset. So I hope you'll take these midlife money moves to heart so that you can prosper in the new economy.
(20:47): [inaudible] [inaudible]
(20:50): you've been listening to the midlife money gal podcast to learn more and to join our community. This show is for informational and educational purposes. Please do not consider any of the content as personalized financial investment tax, legal