Tips on managing your money—and your retirement savings—in a pandemic

The widespread attempt to contain the virus has imposed restrictions on everyone. And, although many of us are getting tired of changes to our work lives, wearing a mask, and social distancing, there are some pandemic-related financial lessons we can learn to improve our finances for the short and long term. 

1   Take advantage of social distancing savings

As social distancing has changed your habits and spending, make sure you’re actually saving some of those dollars. Although your grocery (and wine) and streaming service budgets have gone up, think of all the expenses you no longer have: 

• Commuting expenses, such as gas and car maintenance or public transportation passes
• Eating out
• Going to movies, concerts, or sporting events
• Gym and other memberships

Tally up your net savings and put it in a savings account so it’s there if more financial surprises or uncertainty come your way. 

As the pandemic has shown, the unexpected can happen at any time. Make sure you have an emergency savings account—an account you don’t touch, except for emergencies. You should try to keep a few months’ worth of expenses set aside in case you lose your job. One way to make saving easy is to make it automatic, setting aside a little from each paycheck, so it never hits your checking account. 

2   Use your stimulus money wisely

If you or a family member has suffered financial loss, the stimulus checks have been critical to helping your current finances. But if you still have your job, think carefully about the best use of that money. Consider: 

• Paying off debt, such as student loans and credit cards
• Opening a savings account just for emergencies
• Starting a college fund for your kid(s)
• Setting it aside for a future vacation, so you don’t have to use a credit card when we can finally travel freely again

3   Manage your debt

Because the pandemic has caused a good deal of economic turmoil, interest rates are at historic lows. This can be a great opportunity to refinance your house or car. You can also try to lower your credit card rates by asking your current credit card company to lower your rate or finding a better deal with another card and combining all your credit card debt on to the card with the lowest rate.

4   Start following a budget

Even with so much uncertainty, setting up a budget can help you take control of your finances. Consider these tips if you’re trying to do more with less—or trying to save more.

• Track and manage your monthly expenses—Looking at your spending can help you eliminate unnecessary costs and prioritize your expenses. Are there memberships or subscriptions that you can cancel or put on hold? Once you decide how much your weekly or monthly expenses should be—that’s your budget—you can track your spending to see how you’re doing.
• Shop around for a cheaper deal—Seeing the numbers in front of you can help point out where it makes sense to try and get a cheaper rate for expenses, such as internet, cable, and phone provider. 
• Find simple ways to cut expenses—Plan out weekly meals before going to the grocery store, and avoid impulse purchases. Try creating your own recipes based on ingredients you already have in your kitchen. 
• Ask for help—If you’re having difficulty making payments, reach out to your landlord, mortgage lender, utility provider, or credit card company, as some companies may be able to offer assistance during the pandemic.  

Although your retirement plan is a long-term investment, make sure you check in on it from time to time. Be careful with short-term actions that could endanger your savings. Try to continue contributing to your retirement plan, even if you have to cut it back for a while. And try to leave your money in the market, even if the stock market starts to swing up and down again—because over the long run, the stock market has historically grown, and you don’t want to miss out.

Let’s use a hypothetical: How would a $100,000 investment in stocks have been affected by missing the market’s top-performing days over the 20-year period from January 1, 2000, to December 31, 2019? In this example, an individual who remained invested for the entire time period, would have accumulated $324,019, while an investor who missed just five of the top-performing days during that period, would have accumulated only $214,950. That’s a big difference in savings.

_{Source: BlackRock; Bloomberg. Stocks are represented by the S&P 500 Index, an unmanaged index that is generally considered representative of the market. Past performance does not guarantee future results. It is not possible to invest directly in an index.}

Borrowing from your retirement plan? When times are tough, your retirement plan can offer some financial relief. But remember that you’re borrowing from your future. If you decide to take a loan from your plan, don’t stop contributing to your retirement savings, even while you’re paying back your loan. When you stop contributing—even temporarily—you might miss potential market gains your money could’ve earned by staying invested. And don’t become a regular borrower, as that can really do some long-term damage to your retirement balance. 

Things may seem a little daunting at the moment, but, eventually, the pandemic and all its changes will end. Try to take advantage of the time at home and any potential financial upside you can find: Reassess your priorities and adjust your goals, and come out of it all with not only your physical health, but your financial health as well.