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How to prepare (and prepare your money) for COVID-19 in 2021

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Many people suffered economic or personal shocks in 2020. There have been significant job losses, thousands of businesses closed, astonishing death tolls and even more people hospitalized or unable to work because of COVID-19. The economy responded to all of these problems by slowing down, leading to a virus-induced recession.

The economy is recovering. Markets have returned fairly quickly and some jobs have returned, although unemployment remains high. The government also provided quick economic aid with the CARES Act, but the election derailed efforts to provide more. Now the second wave is upon us. While great progress is being made on a COVID-19 vaccine, the likelihood that it will be widely distributed over the next few months is slim.

Having largely been caught off guard in 2020, how can businesses and individuals prepare financially for 2021? While this is a big business, it is achievable if people make solid financial plans and stick to their budgets.

Planning to survive more severe setbacks will be essential to weather another wave of COVID-19 financially intact. The first task is to make sure that you have an emergency fund in place, preferably one year of spending in cash or in very liquid investments.

To realistically reach your savings goal, especially when your income is variable, save a percentage of your income rather than a fixed number. Set a doable percentage and follow it religiously to provide a good cushion to lean on. In addition, people should reduce their debt and try not to take on new large debt this coming year.

Finally, everyone should regularly reassess their well-prepared financial plans throughout the year 2021 to ensure that they are in the best possible financial position. Where do you start? Here are five steps to consider.

To optimize financial plans, review regular expenses and remove unnecessary items. It’s easy to forget about automatic payments, and those unwatched streaming channels can make a lot of extra money every year. It is important to review these expenses to ensure that the paid items are actually being used. Otherwise, cancel them or stop them.

People should also create a plan for if or when the worst happens. Your minimum budget should only include what needs to be spent to avoid disaster until better times arrive.

Some stocks suffered particularly this year, while others, such as general healthcare stocks and medical stocks, performed well. It is a good idea to review and refine financial portfolios now while there is still flexibility in place for 2021. Given the interest rate environment, also consider planning to ‘other portfolio income. For example, you might consider buying from publicly traded real estate companies. While there are still risks that need to be considered on a case-by-case basis, many of these names have sold off due to the pandemic and are trading at attractive values.

Equally important at times like these is to avoid reacting only out of fear when drastic market changes occur. Financial advisers can help those who are worried about their actions and explain what can be done without panicking.

Many people have discovered that when their jobs or employers disappeared in 2020, they retired suddenly and unexpectedly. In view of this permanent risk, retirement savings must be increased as much as possible. Savers can use them up much sooner than expected, as some people have decided it is worth taking early retirement.

Those who are already retired and approaching 72 next year should also prepare for the minimum deductions required in their financial plans. If not done on time, MSYs can have devastating financial consequences.

While April may hold surprises in store, it’s worth anticipating and dealing with them now. According to the IRS, unemployment compensation, including the additional $ 600 per month from the federal government, is taxable, and if taxes have not been withheld, it may be a good idea to make a prepayment in the fourth quarter. of 2020 to reduce the payment. shock in April. Also consider whether the liquidated investments may have had an impact on your tax situation.

Plus, there’s still a very small window for a $ 300 charitable cash contribution to the CARES Act this year, and that could help with a deduction, even for those who don’t itemize. Finally, for those who expect a refund, it would be good to deposit as early as possible and have those funds on hand to save or invest.

When times are uncertain, it is essential that insurance coverage is adequate and up to date. Life insurance should be in place, especially where there are minor children, in case one or both parents are no longer able to contribute to the family’s income. Plus, review health insurance to make sure the pandemic won’t result in calamitous expenses that even careful planning won’t cover enough.

Finally, when the climate calls for it, make sure homeowners and flood insurance are updated to guard against disasters that can occur regardless of COVID-19.

In short, 2020 has taken everyone by surprise. A prosperous and healthy market fell like a stone within days, job losses piled up quickly, and businesses failed left and right. But as 2020 turns into 2021 and COVID-19 looks set to strike hard again, it is possible – and essential – to plan for the new developments that may be around the corner. Making financial plans, racking up savings, and looking at all the relevant situations can make surviving another plague year an achievable goal.

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