Seven Financial Steps to Take When Fear Takes Over

Do you remember the dozen or so adventurers who set out on a 25-day rafting trip down the Colorado River, off the grid and blissfully unaware of the news?

When they pulled their rafts up on March 14, a guide from Flagstaff met them and told them the whole world was in the grip of an escalating pandemic. Half of the rafters were sure the guide was joking. Then reality hit and they became just as stressed out as the rest of us.

Pretty much everyone, unless you have been on a raft somewhere with no communication all this time, is experiencing some level of fear or anxiety now.

During times when the lockdown experience consumes every aspect of life—your work and socializing are now remote, your gym is probably closed, your parents might be vulnerable and your kids are at home and bored, bored, bored—it’s important to find a place where you can exercise control.

As a financial planner, I’ve spent my whole career helping clients make sure they’re in control of their finances and can remain so in an emergency. But now that a worldwide red-alert of an emergency has hit, there are still ways that you can take control of your finances and give yourself the gift of a little less worry. Here are seven steps that could be particularly helpful at this time:

1. If you are a homeowner, the current low interest rates mean you have an unprecedented opportunity to refinance your mortgage. Depending on your situation, it might make sense to lower the term of the debt to pay it down earlier than originally conceived. For others, that 30- year mortgage at a low rate is an opportunity to cut down on your monthly outflow and use the difference to either save or pay off higher interest debts.

2. After the long stretch of good years in the stock market, you might be sitting with concentrated stock positions or other holdings that you’ve avoided selling because you would have been penalized with capital gains taxes. This is a chance to sell those positions and better diversity your entire portfolio.

3. Spend some time getting a handle on your finances. I mean everything from your cash position to the dollars going out the door each month. Separate the fixed costs from the semi-discretionary from the totally discretionary and make adjustments to your spending wherever possible.

4. Clean up your messes. Nothing spells control like getting rid of junk, going through piles and organizing. Consider what documents you need and what you don’t. For example, in most circumstances, you don’t need to hold onto tax returns that are more than three years old. Somehow, old insurance policies and other records never find their way to the shredder.

5. Speaking of insurance, make a list of all your policies and the pertinent information for each one. Your schedule should include the type of coverage, insurance company, date of coverage, cost, deductible, policy limits, beneficiaries, etc. This is an assessment of your risk mitigation program, and it will help you figure out where you have enough coverage, where you might be paying for more than you need, and where there might be holes in your planning.

6. Rebalance where appropriate. If you have a properly devised portfolio, you began with an asset allocation that was meant to reflect the amount of risk you’re able to assume. If you haven’t rebalanced, this can be a great time to do so, regardless of where we are in the market cycle. Remember that trying to time the market is completely foolish—you never magically “know” the perfect time to buy or sell.

7. Don’t live in a bubble. Even during times of social distancing and progressive fear, reach out and talk to your financial advisor, or if you don’t have one, find one who can meet you virtually to discuss your concerns. Communicate your fears, doubts, questions and concerns. Talk it through. If doing so with a financial planner doesn’t help, try reaching out to a therapist, clergy member or someone who can listen and help you put your fears into perspective.

We don’t know when this crisis will subside and return our world to some semblance of normal. But we can still focus on our values and on active steps to control and improve our situations. Together, we can support one another as we all ride these unknown rapids.

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