By Brandon Miller, CFP–
Ideally, you don’t plan for what to do in a disaster when you’re in the midst of one. But perhaps you didn’t get your financial act together before this recent confluence of events that has us feeling as unmoored as a cow in a tornado.
Let’s not dwell on shoulda, woulda, couldas. Because this article isn’t about “Honey, that ship has sailed.” It’s about why creating a financial plan is still a smart idea even in the midst of all this chaos. Here’s my thinking:
The fat lady isn’t singing.
First, let’s acknowledge that we are not at the end of this pandemic (sadly) or the fight for justice (thankfully). The speed with which recent events have altered our lives and our thinking should be a reminder that we have no idea what’s in store for us next week, next month, or even next year. And lest we forget, the Bay Area is earthquake and wildfire country. We live with the day-to-day knowledge that uncertainty is a certainty.
Rather than go into a litany of all the adversity that could befall you, let’s just agree that there will be other things in your life that are beyond your control and have an impact on your money.
Planning ahead gives you the advantage of preparing for the financial setbacks (as well as the opportunities) that can arise from abrupt changes to your life. You may be going through first-hand experience of how wonderful it is to have—or how terrible it is not to have—a cushion of money to fall back on when work is lean. Learn your lesson and become or stay well prepared for next time.
You don’t need more stress.
Controlling what you can puts you in, well, control. And research shows that helps you to feel calmer than worrying about all of the many things you have no power over.
While you can’t dictate the impacts of what is happening in the world, you can control how you handle your money to meet the new realities in your life. Do you need those college-fund funds to pay bills? Should you stop paying down debt so fast to build up your emergency funds? Or are you doing well and looking to maximize your stimulus check?
Again, knowing where you stand financially helps you to see where and how to pivot to improve your position.
You could be making or saving more money right now.
Preparing your finances for life’s unknowns can help you to take advantage of strategic openings brought about by these changes, such as:
Investing excess cash—Falling stock prices can offer some awfully good bargains if you know you don’t need this money for essentials.
Tax-loss harvesting—This takes some of the pain out of investment losses that many of us are experiencing right now. Basically, you use your investment losses to offset gains in your portfolio, thereby reducing your tax bill.
Roth conversions—Converting a traditional IRA or other retirement account to a Roth account means paying taxes now instead of later when you withdraw the funds. Obviously, if your retirement account’s balance has dropped, that means you owe less in taxes.
Portfolio rebalancing—Whether your risk tolerance is dropping with the market or you want to be better positioned for ongoing volatility, now might be a good time to see if your investment mix aligns with your new reality.
Reducing concentrated stock positions—If you have too much of a good thing, selling off some of your highly concentrated holdings while prices are low can reduce your capital gains taxes.
Dollar cost averaging—This is still one of the best ways to reduce the impact of market volatility. Basically, it’s investing on a consistent schedule—$500 into your IRA every month, for example. Over time, you invest during up and down markets, which helps to even things out.
The good news is, you haven’t missed the boat. There’s still time to enjoy the advantages of a solid financial plan, including your own peace of mind.
So, carpe diem, folks. And that means seize the day today, not some day in the distant future when who knows what the world or you will be facing.
The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. Brio does not provide tax or legal advice, and nothing contained in these materials should be taken as such. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
Brio Financial Group is a registered investment adviser. SEC Registration does not constitute an endorsement of Brio by the SEC nor does it indicate that Brio has attained a particular level of skill or ability. Advisory services are only offered to clients or prospective clients where Brio Financial Group and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Brio Financial Group unless a client service agreement is in place.
Brandon Miller, CFP®, is a financial consultant at Brio Financial Group in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.
Published on June 11, 2020
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