With three months until the 2020 U.S. presidential election, a national poll finds that more than one-third of likely voters have a dismal view of their finances — and a bleak outlook for employment, wages, job security and health care.
Of the more than 2,300 likely voters in the most recent CNBC and Change Research‘s States of Play poll, 35% of respondents said the current state of their personal finances is “poor” or “not so good.”
Looking ahead to next year, more than half of respondents said they are “worried and uncertain” about the unemployment rate (60%), wages rising (52%), and health-care costs (57%). Nearly one-third of respondents said that about their own job security, while 41% said they are “worried and uncertain” about their personal finances in 2021.
1. Figure out your financial runway
Look at the value of your cash and taxable investments. Then, divide that amount by your monthly living expenses. That number that you come up with is your financial runway — that’s how many months you’d be able to fund your current expense without any income.
“If you’ve calculated your runway and determine that you will need to withdraw from investments, you should consider selling the investments now to prevent any potential losses,” said Andrew Westlin, a senior financial planner at Betterment.
2. Meet with a partner for a real “money talk”
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Make a “money date” with your spouse or partner, or trusted family member or friend. Certified financial planner Stacy Francis, president and CEO of Francis Financial and a member of the CNBC Financial Advisors Council, says now is a “great opportunity to understand where everything is and ask yourselves: Do you have an emergency fund? Have there been income changes? Where do you stand after Covid?” You and your partner can help to hold each other accountable for coming up with ways to get a better handle on your money.
Consult with a financial advisor, too. “No one hesitates to get a yearly checkup with a doctor but few think to do it with a financial advisor,” said Francis, founder of Savvy Ladies, a non-profit financial education organization for women that has a free helpline to connect you with a professional advisor.
3. Automate your pay
Your paycheck doesn’t have to go into one checking account. Have your pay deposited into multiple accounts. Put enough in your checking account to pay monthly bills. That’s it. Then put some in a savings account for your emergency fund, and some in an account for longer-term savings goals. You may even want a small savings account for your “fun money” — for entertainment and travel, when you can do that again.
4. Face your debt
Reach out to your lenders and creditors to find out what kind of Covid-19 relief programs they are offering. You may be able to delay your monthly mortgage payments for up to one year and stop federal student loan payments — and pay no interest — until the end of December. Some credit card issuers may allow you to delay payments and waive interest as well.
“If you feel you have some extra money every month, look at some of your permanent payments, such as mortgage, car payment,” said Dan Ariely, chief behavioral economist at Qapital. “Add a little bit [of money] to each of them every month.
“This will dramatically reduce the duration of your loan — and it’s probably a good way to increase your total financial well-being.”
5. Boost your savings
The traditional rule of thumb is to have three to six months’ worth of living expenses saved in an emergency fund. Few Americans had that much stashed away even before the pandemic. Make it more realistic. If you’re making 25% less than you did before the pandemic, then save 25% less. Save some amount, however small, on a regular basis. And put it in a high-yield savings account at an online bank since the interest is higher than a traditional savings account.
Bump up your retirement savings contributions too, even if it’s just by 1%. “With the global pandemic, we’ve seen a decrease in non-essential spending” said Michaela McDonald, a financial advice expert at Albert. “Now is the time to redirect those additional funds and invest them in your future.”
“For those just starting out with a 401(k) or IRA, simply investing in a target date retirement fund is a great way to begin your investing journey,” said certified financial planner Roger Ma, founder of Lifelaidout.com. “You only have to keep track of one fund, which will be made up of a well-diversified mix of stocks and bonds, and the ongoing maintenance of your portfolio — rebalancing — is taken care of for you.”
McDonald recommends contributing at least 15% of your income to a retirement account each month if you are in your 20s and 30s and more if you’re 40 and over. “Although the markets seem uncertain, the more time you spend in the market, the more experience and opportunity you gain,” she said.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.