Way, way back at the beginning of the Common Era, Epictetus offered some advice that remains relevant today:
“It’s not what happens to you, but how you react to it that matters.”
In 2020, a lot changed – and Millennials are reacting. We’re adapting to pandemic conditions, hoping for economic improvement, positioning for financial market uncertainty, and coping with a lot of stress from the unknown.
One way to address stress is to take positive action by conducting a year-end review of your financial plan. That may not sound like it will reduce your stress but taking control of something you can control may really help. You’ll be able to start the next year with confidence, knowing exactly what you need to do to protect your financial health today and tomorrow.
These three steps can help you get started
1. Assess your work and income situation
Coronavirus has rapidly changed the business landscape. Some companies are at a standstill while others are busier than ever. Last year, Gartner Research reported:
“Dramatic changes in customer demand are putting organizations under huge stress: Sharp declines in demand present serious financial challenges to many businesses, while those facing demand surges and resource shortage risk disappointing and disengaging customers.”
Think about your industry and your company. Will coronavirus have a short- or longer-term impact? How could your income be affected? If it could be affected, are there steps you need take to reduce income risk? What are they?
2. Review your spending and expenses
There is never a bad time to review spending and expenses. This allows you to make sure your spending plan is working for you and is ready for the future. If your income will be significantly different in the near future, your spending plan may change.
Typically, a spending plan keeps spending and saving aligned with income. If your income will be lower in the future, you may need to reduce the amount you spend and save. If your income increases, you may be able to increase the amount you spend and save.
If you cannot find a way to align income and spending, talking to a CERTIFIED FINANCIAL PLANNER™ may be a helpful option. They should be able to review your spending and expenses from a professional standpoint to help you set the best course of action.
3. Evaluate your financial plans
It’s important to review your current financial plan to see whether and how progress toward your financial goals will be affected by changes in spending and saving. Sometimes, looking at current spending and saving decisions through the lens of your financial goals can help you decide how to modify your plans.
For instance, when income falls, some people choose to save less, knowing it will push their financial goals further into the future. Others decide to spend less so they stay on track to reach their goals. Often, people decide on a combination of reduced spending and reduced saving. The choices you make will depend on your circumstances.
2020, and 2021 so far, have been years for the record books, often in unwelcome ways. The way you react to what has happened may significantly affect your financial health and well-being over the short-term and your ability to reach your financial goals over the long-term. Do not be afraid to seek help from a CERTIFIED FINANCIAL PLANNER™ to better understand what your financial health looks like.
