8 min readFinance 16 July 2020
Not to prematurely declare the current public health and economic emergencies over (because it's not), but the reopening of some businesses this summer presents a good time for many of us to reflect on our finances. It's a practice we self-reliant women should be doing all the time anyway, and now there is a unique opportunity to assess and learn. With four grueling months of health scares, social distancing, and financial instability, let's look at how we did.
Specifically, there are four key pieces of our fiscal puzzle that should be analyzed in a post-lockdown evaluation: retirement, budget, investments, and career. Each plays a critical role in our overall strength and well-being, and each was stressed during the turmoil known as the first half of 2020. Without these four pillars of security, it is virtually impossible to provide for your family, secure peace of mind, or simply enjoy your financial independence.
If it seems like we're starting backwards by beginning with the funds that will be used last, that's because reverse-engineering can be the simplest way to getting the answers you need. Your retirement savings, whether it's an employer-sponsored 401(k), individual retirement account (IRA) or something else, should never be taken for granted due to its long timeline. In fact, it's one of the best barometers we have for our own financial health.
Think of your retirement as the proverbial canary in the coalmine. If the nest egg cracks, it will likely impact everything else tenfold. Everyone's risk tolerance varies, but a retirement portfolio should be set up to reduce risk and exposure in your investment strategy, the closer one gets to her retirement date.
A loss of retirement funds just before that critical milestone as a result of a pandemic or other economic calamity really can be the nightmare scenario for women of a certain age.
It's also one of the more obvious wealth sources that can be tapped during an unforeseen emergency like COVID-19. Under the CARES Act, Americans can take a withdrawal of up to $100,000 from their 401k or IRA without the typical 10% early withdrawal penalty; however, the distribution will be taxed at ordinary income tax rates. The total amount of the distribution is treated as income and taxed accordingly. The CARES Act gives you three years to pay the taxes on the withdrawal (normally, it is a one-time lump sum tax payment) or you can repay back what you withdrew to your 401(k) or IRA and receive a tax refund.
Although the CARES Act enables us to take a withdrawal to help us during this unprecedented time, before you take the step of dipping into your retirement, it is better to explore all other alternatives first. The permanent loss of principal from withdrawing early and the long-term benefits of compound growth is extremely detrimental to your retirement outlook. The worst time to withdraw investment assets is in the middle of a downturn and extreme volatility; investments will be worth less and, hence, investors will have to withdraw a greater percentage of their account and will turn temporary paper losses into permanent realized losses.
Even if you try to replenish later, you will have lost all the compounding of growth from the withdrawn principal and the concern is that if you take advantage of the CARES Act provisions and withdraw, there is a good chance that you will not replenish the withdrawal which will be a permanent reduction.
We all think that retirement is somewhere out in the future, but it does ultimately arrive sooner than we think, and without retirement funding, retirement can look bleak. Women tend to live longer than men and need to understand the longevity of their retirement funding.
The unexpected fall out from the pandemic involved many people losing their jobs. This is obviously very stressful, and although stimulus checks may have been forthcoming and unemployment compensation may be available, there could have been long delays in receiving these payments.
It is essential that every woman has a budget. Have an honest conversation with yourself about how you spend your money and track it! Even if you are the only one in your household, it is important to review your savings and fine tune your budget. Determine what is necessary and what expenses can be cut.
There are many free budgeting apps that can help you to create and monitor your budget and your savings. It's best to track your finances in real time using a spreadsheet or tech-enabled tool such as Mint so you get the best read on where your money is going. Make sure to scrutinize your fixed costs such as rent, mortgage, utilities, cell phone, food, and all insurances, including health insurance. List all credit card payments. Review all discretionary expenses and line item what you are spending that are non-essential. Eliminate or severely reduce online shopping, clothing, and subscriptions. Re-evaluate your takeout food purchases. The more you understand, the easier it will be to find a way to save.
Every woman needs to prioritize having an emergency fund which equals three to six months of living expenses that can carry them through unforeseen circumstances such as job loss or illness. Regardless of your income, an emergency fund is essential! Women of all income levels need to have an emergency fund — it is the life raft when there is turmoil.
The sequence of solid budgeting is to track spending, pay down all credit card debt, and establish an emergency fund. Once you do that, you can move on to investing.
This pillar has to do with the more active aspects of wealth creation. Stocks can be a sizeable part of an investment strategy, but diversification of asset classes — whether its mixing bonds, alternative investments (such as liquid hedge funds, hedge funds, private equity, or REITs), real estate or art — is a key component of long-term financial independence. It aims to maximize returns by investing in different areas that would each react differently to the same event. If one portion of your portfolio is declining, it may ensure that other portions are not declining or not declining as much.
With that in mind, ask yourself, "How did my strategy fare since all hell broke loose in March?" Did you have a diverse allocation, and did you make decisions during the volatility from fear or rationality?
A good stock selection strategy is to focus on the fundamentals of companies issuing the stocks. Remember that buying stocks is buying ownership in a company. Does the company have cash flow, too much debt, good management, and are they allocating funds for capital expenditures, shareholder returns, and dividends?
With the return to a lower interest rate environment, the dividend yield opportunities available within the equity market are at more compelling levels relative to fixed income securities than the historical norm. Investor income requirements will likely result in greater demand for dividend-paying stocks. More than half of the S&P 500 stocks yield greater than the 10-year Treasury yield, as of the end of last year. During such times, high-dividend growers have outperformed high-dividend yielders and the S&P 500. Dividend growth stock investing focuses on companies that pay dividends and grow dividends annually.
Regardless of price dips, dividends will be paid, and this especially helps investors who are living off their portfolios in retirement. Companies may change their dividend policies, so be mindful of that. Also, be mindful of overconcentration in one stock – probably prudent not to have one stock make up more than 5% of your portfolio.
With respect to bond investments, consider varying elements such as maturities, credit qualities, and sensitivity to interest rate changes to diversify within that asset class.
Once you have your mix of stocks, bonds, and alternatives, on a regular basis check the weightings of each allocation to make sure that they still make sense given current market conditions; from time to time you should rebalance your allocations.
Additionally, do not try to time the market or execute short-term trades as an investment strategy. Market timing can be very risky. If you have a long-term, diversified strategy, don't let fear motivate you to cash out during dips in the market – that will result in permanent capital loss. If you stay the course over the long-term, you will benefit from the ultimate run-up and recovery.
It takes discipline and consistent investing to build wealth as well as patience and unemotional decision making. Make regular saving and investing a priority by setting up automated, regular deposits.
Reviewing your strategy shouldn't be done only in times of crisis. It is helpful during bull markets and periods of personal and professional success as well. Keep in mind, though, that stress testing finances isn't merely checking up on your investment accounts. Rather, it's a holistic view of your entire financial picture.
The same look at how your money fared during the crisis should be applied to your job as well.
Were you able to keep your job during the quarantine? Were your salary and/or benefits cut? Is working from home something you'd like to continue?
Perhaps your career trajectory wasn't as solid as you thought it was prior to the outbreak and some pivoting in the form of additional education and training or an entirely new professional endeavor are in order. Times of stress are not fun nor avoidable, but they can be a useful reflection tool. If it wasn't for the disruption of the pandemic, it's possible that you wouldn't have found the flaws in your career — and then made the necessary self-improvements.
Unfortunately, more than 21 million Americans lost their jobs as of June, and reflection might not be a luxury all of us can afford at the moment. A crisis of that ilk requires character to persevere.
The good news is if you are smart with your finances, you have options. In addition to federal economic stimulus — and likely subsequent waves of stimuli — private companies have demonstrated leniency. From utilities and car payments to mortgage forbearance and credit card interest rates, there could be a deal to be struck somewhere. Additionally, there are always the 0% credit card options, either as a balance transfer or a place to temporarily park debt for free until your finances are right-sized.
Whatever it takes, you will do what you have to in order to feed those who depend on you and rise another day. With this unique opportunity for reflection — and the ongoing stress-testing of your finances every three to six months — we'll all be stronger when we come out the other side.
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5 min read
When we envision a person who is suffering from substance use disorder (SUD)—defined by having a history of past misuse, experiencing increasing mental health symptoms, or having a family history of addiction—we often picture someone waking up and instantly grabbing their first drink. However, in my experience working with those battling SUD for nearly a decade, I've learned that everyone's relationship with alcohol looks different and having a few too many drinks at night can be just as dangerous.
The time of day, amount, or type of alcohol one drinks doesn't define if they suffer from SUD or not—it's the compulsion to drink. By focusing on healthy stress relievers and implementing them into your daily routine, you aren't just avoiding another glass at night, you are curbing any inclination for SUD that you may have.
While you may feel the desire to reach for another drink after dinner and putting the kids to bed to relieve some of the stress you incurred that day, there are other things that you can do that are much more beneficial to your mental health and wellbeing.
Risks of Reaching for Another Drink
Reaching for another cocktail or glass of wine can feel like a great way to relieve the stress of the day at the time, but over time it can actually lead to the opposite. Excessive drinking is known to lead to increased anxiety, depression, and other mental health disorders such as increased risk of family problems, altered judgment, and worsened sleep quality. These can all lead to increased stress and create a continuous cycle I have seen in many of my patients, which often prove difficult to break.
Increased alcohol consumption can directly impact an individual's mood and temperament, too. In my patients, I've seen a connection between increased alcohol consumption and irritability, fatigue, and loss of interest in activities that previously brought that person joy—activities that people should always put time into, especially right now during the pandemic.
While drinking in moderation doesn't have serious implications for some, others are already at increased risk for SUD. One drink per day is considered moderate for women, while eight drinks or more in a single week is categorized as heavy drinking. It's important to monitor your intake—whether you are at increased risk for SUD or not. It is all too easy for one glass to become another, and then another. And if you keep reaching for just one more drink, you can start to build a tolerance, as it requires more and more alcohol to achieve the desired effect. This can result in dangerous, addictive habits that will alter your life, and the lives of those who care for you.
Three Healthy Ways to Relieve Evening Stress
Stress relief from alcohol is short-lived, but choosing healthier, alternative stress relievers can provide long-lasting benefits for both your mental and physical wellbeing. At Wellbridge, our team not only focuses on treating addiction but also on teaching healthy habits to support ongoing sobriety. And many of these learnings can be implemented to avoid addiction by handling stress better as well!
Below are three healthy stress relief ideas you can implement into your routine:
- Mindfulness exercises can be a powerful and mentally stimulating stress reliever. Throughout our therapeutic program at Wellbridge, we provide different opportunities to cultivate mindfulness. For example, breathing exercises, such as box breathing or diaphragmatic breathing, mindful walking, and progressive muscle relaxation. If you're looking for entry, guided meditation, check out this YouTube channel where experts post mindfulness exercises each week.
- Human connection is invaluable. Whether it is your spouse, your children, a friend, or even a therapist, connecting with someone else can be a great way to relieve stress. The additional perspective that another person provides can also help us feel that the anxieties and stressors we are experiencing are more manageable. If you are feeling increased stress from loneliness or isolation, reach out and schedule a Zoom coffee hour with a friend, or call a loved one to check-in and chat.
- Physical activity is an excellent stress reliever as well, for so many reasons. Not only can it help us get our mind off of stress, it enables our bodies to release endorphins and provides long-lasting physical health benefits. Physical activity doesn't need to be a full-blown workout if you don't feel up to it, or simply don't have extended periods of time to dedicate to a longer exercise regimen. Even a short walk or some stretching can go a long way towards improving your mood. I enjoy following guided, online yoga practices for both mindfulness practice and physical activity.
Despite my years working in this space, I am no stranger to giving in to stress. However, I've learned that by allotting myself a little time each morning and evening for activities that set a positive tone in my life—like meditation, journaling, and exercise—I've been able to better manage my stress and feel more prepared for heightened periods of stress. Do I manage to set aside personal time every morning and evening? Definitely not—life happens! But by doing our best to take regular time out for ourselves, we're all certain to be in a better place emotionally and mentally.
Putting Your Mental Health & Wellbeing First
It's important to also recognize that it isn't just stress that causes us to reach for another drink at night. With the added pressures and responsibilities of women in today's world, having another glass of our favorite drink at the end of the day can often seem like a quicker and easier option than other healthier ways to relieve stress.
However, it's essential to put your mental health and wellbeing front and center in your priority list—something that many women struggle with. But just like the oxygen masks on an airplane, you can't take care of others if you don't take care of yourself first. By focusing on implementing small, healthy habits and making them a seamless part of your daily routine, you ensure that you can show up in all aspects of your life and for all the people in your life.
If you are struggling with increased stress, be specific and honest with your support system about your need to preserve your mental wellbeing. Prioritizing your needs will help you be there for other people you care about in your life.
I always refer back to a quote from a Dar Williams song—a song about therapy no less! "Oh, how I loved everybody else when I finally got to talk so much about myself." Talk about your needs with others and find time to develop healthy coping habits. And if you feel as though you've already created an unhealthy relationship with alcohol, discuss that relationship with a medical advisor to learn if advanced treatment is the right option for you.