Connecticut Money: Recover from pandemic-induced income loss

This article was published in the New Haven Register on December 4, 2020.

Nine months into the coronavirus pandemic, many Americans are feeling a financial strain.
Incomes have fallen in many households, leading more people to tap into emergency funds
or even borrow money to meet expenses or pay debts.

There are a number of practical steps you can take in the face of income adversity, steps to
shore up your financial base and rebuild for the future.

One of the first things I advise clients is to step away from the news: Limit your exposure to
financial news and especially to social media. Much of the content is negative and may
cause you to make hasty decisions you later will regret.

Other measures you can take include:

Evaluate your emergency fund. Some advisers will tell you to keep three to six
months’ worth of living expenses in an emergency fund, but this pandemic has shown us
that may not be enough. I advise my clients to keep an emergency fund with at least six
1/2 months’ worth of living expenses and ideally closer to 12 months.

Consider taking dividends. If you currently have your portfolio set to automatically
reinvest dividends, you can change that and take your dividends as a source of cash flow.
This can be very helpful to people who have lost income due to the pandemic and who own
stocks that pay dividends. Companies that pay dividends most often are the type of
companies that will stay around awhile.

Discuss portfolio strategies with your financial adviser. Tax management is one
area in which your financial planner can provide guidance. For example: Let’s say that you
own stock in the home improvement industry, and that stock is down $5,000. You can sell
the stock for a loss and invest in a competing home improvement firm. If the stock of the
new company runs up by $5,000 as the economy comes back, you have zeroed out your tax
liability.

Cut expenses big and small. Look to tighten your belt with both big-ticket items and
small expenses. Delay any major purchases. If you have a mortgage, rates have fallen — see
if you can save money by refinancing now. On the other end of the scale, comb over your
bills for the past year and note items that you paid for but didn’t use, such as TV streaming
services and gym memberships. Do you need to continue paying these bills?

Evaluate your business. If you’re a small-business owner, review expenses for your
office — are you paying for water delivery you no longer need? Review your insurance
coverage, for instance property and casualty for an unused office.
Be aware of legislation. Monitor federal and state authorities responsible for providing
financial or other benefits related to the pandemic.

Update your financial plan. Having clarity will not only help you control your financial
future, it also will relieve your anxiety as the pandemic rolls on. A financial planner will be
happy to help you via emails and telephone conference.