Personal & Business Finance Lessons from COVID-19
Beginning in 2020, massive changes in the lives of Americans have evolved. Along with rising unemployment, an unstable economy, and business shutdowns and closings nationwide, come decisions as to how to evolve financially both personally and in businessi.
Emergency Funds Importance
- Personal – It has been extremely difficult for many employees in the service industries due to business shutdowns. Any savings many of them had are being depleted just to keep their heads above water. For those who remained employed, many have enjoyed an uptick in available money due to stimulus payments. Whatever the situation, planning for the possibility of repetition and continued disruption requires putting away money for an emergency fund even more important.
- Business – Consider reallocating some illiquid assets into liquid funds to handle emergencies. From a full or partial shutdown to a need to revamp to serve remote customers or use remote workers, money is necessary. Avoiding debt through liquid backup funding is critical to business survival.
Financial Goals Importance
- Personal – However your personal financial situation has been changed post-COVID, what becomes important is to adapt with your financial goals to maintain forward financial momentum. If your income is down, downsize your short-term goals to adapt but maintain forward progress. Then, stick to your new goals and plan.
- Business – Look at your business plan to see how your new post-COVID financial situation has changed. See how you can adapt in processes, management, and customer relations to create a new, though maybe temporary, business plan and financial goals. Set it out and follow it until situational changes call for a new plan.
Asset Protection & Estate Planning
- Personal – A great many people are not properly prepared with estate planning to pass along their assets to heirs. If you do not already have them in place, consider:
- Documenting assets and values.
- Creating a will to designate how your assets should pass after death.
- Assess your current insurance policies and if you need more insurance.
- Set out beneficiaries for bank and savings accounts to pass them without the expense and delay of probate.
- Business – Asset protection in a business is critical, especially if others are involved, such as in a partnership, S-Corporation or LLC. Whether it is specialized insurance for business owners or changing business entity structure to gain asset and liability protection, consider getting things in order.
- Personal – Whether you participate in a retirement plan with an employer or not, take the time to consider not only how to save money for retirement, but also how you anticipate spending in retirement. Often a realistic look at anticipated retirement spending shocks the saver when they see they will fall short of the necessary funds for their anticipated lifestyle.
- Business – Consider the same things as in personal planning but add in consideration of how you may want to add to or change how your business contributes to your retirement and that of your employees. Consult with your tax professional and financial planning professionals to assess your current retirement plan(s) and how they can be changed to adapt to the new post-COVID world business environment.
It is critical that, both personally and in your business, you reassess your priorities and current systems and plans post-COVID. Adapt for financial security now and in the future.
i Personal Finance Lessons from COVID-19, LegalZoom