For Southern Californians, traffic jams are a way of life (or at least they used to be!). We know the drill. When there is a sig alert on the freeway, we have options. Some will try to Waze-it to an alternate route, though I prefer just to accept the pause. To sit, and to wait. Of course, we make way for the essential services to get through—the police cars and ambulances and tow trucks—and then wait some more. When, at last, the obstructions are moved safely to the shoulder and traffic begins to flow, it takes quite some time to get from zero to 70. The lanes are clogged, drivers are irritated, and looky-loos can’t help but crane their necks to learn what all the commotion was about. It’s a rite of passage for all of us.
As we close out another week under stay-at-home orders due to the coronavirus, the economy is experiencing a major sig alert—all lanes are closed. “When will we finally get moving?” is the question on everyone’s mind. As is true in any traffic jam, we have no way of knowing when the end will come—and no way to control the timing. What we can do, however, is accept where we are and choose to use the downtime wisely. Amid the major ‘traffic jam’ caused by the coronavirus, the internet is full of stories of people making the most of the lockdown. Some are creating virtual vacations online or watching films that take them far, far away. Others are learning a new language, dusting off a long-neglected hobby, or finally learning how to play the guitar (via online lessons, of course). One family transformed their house into Disney’s Pirates of the Caribbean ride. Musicians around the world are offering online concerts instead of live performances. While all of this creativity is fantastic, one of my recommendations to do during your forced at-home time (at least from this advisor’s perspective) is to take a deep-dive into your finances. Here are four steps to get started:
- Finalize your 2019 taxes.
Sure, the official due date for your 2019 taxes is now July 15th, but why not take this time to check taxes off your to-do list once and for all? If you are due a refund, you can get that money in your wallet and working for you within days or weeks. If you owe taxes, you can always file now and, if you prefer, wait until July to pay what’s due. Filing now may also help you qualify for a stimulus check, thanks to the CARES Act.
- Reorganize and rethink your financial life.
Every year after tax season, I urge clients to clean out and organize their financial records. This year, you really do have time to make it happen! Start with our handy Keep or Toss guide to help you wade through and slim down your records. Scan or file anything you need to keep and shred what you don’t. The process may also help you identify any financial action items that may have been sitting on the backburner for years. This may be the perfect time to update your estate plan, open a Keogh or Solo 401(k) plan, or rethink your long-term goals.
- Get digital.
Once you’ve scanned the records you need to keep, get these and other important documents safely online. At Klein Financial Advisors, we offer personal finance tools to help manage your finances, including the popular eMoney platform and our secure Sharefile document vault. With lockdown pushing us to become more digital than ever, this is the perfect time to learn these tools and start using them to your full advantage. (If you are a current client and need help setting up or managing your accounts, we’re happy to schedule time to help.)
- Plan for life post-lockdown.
While it may not feel like it today, this too shall pass. Our lives will return to normal—perhaps a ‘new normal.’ While we cannot predict precisely what our post-COVID lives will look like, here are some clues that can help you start planning for tomorrow today. If you’ve lost a job (or any source of income), start thinking about how to replace that income after the lockdown. If you’ve had to dip into your emergency fund or other savings, creating a strategy for replacing those funds can help get your finances back on track. If this time in isolation has you re-examining your values or reordering priorities, look at your overall financial strategy to be sure it’s aligned with your new way of thinking. Small steps today may have a big impact on your future.
Taking these steps will not only give you something truly productive to do right now; it will also set the stage for a stronger-than-ever financial life when we’re finally able to move forward.
One last note: the internet is flooded with articles about what to do with your stimulus check. My advice is simple: spend it! The shutdown has affected each of us as individuals, but it has also had a massive impact on the US and global economies. In this recent opinion piece in the New York Times, Stanford University’s Edward P. Lazear writes about the need for liquidity, and how cash is the key to helping individuals and businesses survive the shock of the shutdown. Lazear stresses that spending on goods and services is the key to keeping money flowing so when this traffic jam is finally cleared, we have gas in the tank. If liquidity is maintained in the system, he predicts the current economic contraction could clear in six quarters, or about 18 months. One goal of the CARES Act is to give us each the power to do some spending. Now is the time to spend if you can afford to.
California is fortunate to have strong leadership that took aggressive action early to slow the spread of the coronavirus. As a result, as long as we all do our part (mostly by staying home to help ‘flatten the curve’), this traffic jam will be cleared, and we’ll s-l-o-w-l-y start moving. I hope that when that happens, we’ll all have something positive to show for it—and that a stronger, more organized financial life is on the list of accomplishments. Until then, stay home and wash your hands.
To your health!