Why is it important to have a financial plan during COVID?
Market volatility induced by the ongoing coronavirus pandemic has forced many of us to review our finances and consider overall stability in the face of a crisis.
How long can I withstand the current situation? What could I have done differently to avoid such impacts? What can I do now to get things back on track?
Particularly for those who have had their job or regular income impacted by the virus, understanding how to navigate the situation and come out of it in a stronger position is critical.
This is why it’s important to have a financial plan in place.
What is a financial plan?
A financial plan is a kind of roadmap that helps you get from where you are now to where you want to go. It evaluates your current financial position, considers your short and long term financial goals and outlines the tactics you’ll put in place to meet those goals.
It also considers how you’ll maintain financial stability in times of crisis.
While many people have a solid savings plan in place, this is rarely enough to allow long term security in unfavourable conditions such as those sparked by COVID-19.
So what is involved in a financial plan?
A good financial plan will consider:
- Cash flow
- Spending patterns
- Tax posture
- Distribution strategies
- Risk preferences & management
- Insurance coverage
- Retirement planning
- Estate planning
Benefits of a financial plan during a crisis
An effective financial plan will include a comprehensive approach to your finances to ensure minimal impact in times of economic uncertainty.
While a financial crisis will have negative impacts to people across the board, having a solid financial plan in place will deliver an additional source of income and offer peace of mind that you’re in the best possible position to bounce back when conditions return to normal.
When looking at whether your current position could withstand a crisis, there are a few key things you should ask yourself:
- Do you have investments to supplement your salary or wage?
- Is cash flow positive, negative or neutral?
- If you needed to withdraw a distribution from your investment, do you have a strategy in place for liquidation?
- Do your investments appropriately reflect your appetite for risk?
- Are your investments tax efficient for your personal circumstances?
In essence, do you have confidence in your ability to ride out the storm?
Getting your finances back on track
If you’re only starting to think about financial planning now that the crisis has hit, you’re not alone. And the good news is it’s not too late.
Implementing a strategy to guide your financial decisions will not only help you to navigate current challenges but will ensure you’re set up for financial success post-COVID. It will also mean that you’re better prepared should a similar economic downturn occur in the future.
Of course, navigating the complexities of financial planning can be challenging which is why many people fail to do so.
Thankfully, our certified financial planners can help you by evaluating your circumstances, understanding your risk preferences, putting together a tailored plan and implementing it to ensure you’re able to maximise your finances.
Chat with us today to learn more about how we can help you to survive and thrive during and post-coronavirus with a solid financial plan.