If Doing Less Means Saving More, Try These 5 Money Moves

The corona-virus has upended countless jobs, schools and bank accounts. But while undoubtedly more people are struggling than not, those who are still working may have seen their expenses actually drop, due to canceled travel, limited dining options and more time at home.

If you’ve managed to end up with extra money during the pandemic, here’s how to take advantage of those savings.

1. Start or fill out an emergency fund

2020 has served as a stark reminder that unforeseen things could happen, and if they do, it is a fantastic idea to be prepared.

“We say if you’ve got a steady job, your contingency fund should be three to six months of expenditures,” says Tara Unverzagt, certified financial planner and founder of South Bay Financial Partners in Torrance, California. “I’d bulk it up even more because of doubt. I have never known anyone to be upset because they had too much money, but have known plenty of people who were upset they didn’t have enough.”

That level of economies is a stretch goal for most people; an extended period of reduced costs may supply you with the opportunity to finally reach it. Placing an emergency fund is among the best things you can do for your future , and if you place it into a high-yield online savings account, it is going to gain from a greater rate of interest than a normal savings account.

You don’t want to invest your emergency fund because your primary goal for that money is accessibility, not growth. The stock market goes up and down, and there is a real threat that it might go down just once you want the cash. In the beginning, that could mean having to sell your investments at a loss to pull money out. At worst, it might mean your money will not be there when you need it most.

2. Invest for retirement

In case you haven’t ventured into the world of investing nonetheless, it may seem like a frightening time to start given all the volatility in the industry lately. The good news is that volatility doesn’t cause much harm when you’re buying long-term goal such as retirement: The peaks and valleys due to the corona virus will likely appear much smaller over time.

If you haven’t started investing, there are two simple jumping-off factors: your company’s 401(k) if it provides an IRA. Both are reports that could help you purchase retirement with some tax benefits.

Even if you’re already contributing to a 401(k) or an IRA, you may want to consider upping that contribution. Every extra bit it is possible to set toward retirement goes a very long way. Let us say your lower expenses imply you can save an extra $500 per month during the next year. In case you’ve got 30 years before retirement and you get a 6% yield, that $6,000 you invest could add over $34,000 to your retirement equilibrium — a significant boost.

And since you always have the option to change how much you are contributing, you can decrease the amount you’re putting toward retirement if when your spending habits return to normal.

3. Save for non retirement goals
Retirement is a common target, but it probably is not the only one you have. If you’re on track for retirement, consider putting extra funds toward other things: college for your kids, a new car or a dream holiday (which you will have tons of time to save for, since most individuals aren’t traveling right now).

Investing can help you achieve those goals faster than simply saving, but remember that you generally do not wish to invest money you’re going to want within five years. (Like an emergency finance, savings for near-term goals ought to go into safer choices , like a high-yield savings account). On the flip side, if you are starting a college fund for a newborn, that money will have approximately 18 years to benefit from the market’s returns.

If you’ve found yourself in a position of privilege in this global pandemic and have been able to save some extra cash, you may also need to consider increasing your charitable contributions. Remember, you may have the ability to deduct your charitable contributions when tax time rolls around.

4. Explore real estate investments

If you are considering investing in real estate, you do not have to start renovating an old barn or setting up shiplap. Among the easiest ways to purchase real estate is to invest in real estate investment trusts. REITs are companies which own (and sometimes operate) real estate that generates income, such as apartment buildings. Publicly traded REITs are bought and sold on exchanges, just like stocks, and have comparable liquidity, meaning you can sell them with relative ease.

5. Get some help
Financial advice is widely available nowadays, and it is often cheap. Online financial advisors and robo-advisors have caused the price of investment management and fiscal planning down appreciably, and both are great possibilities for when you feel lost.

These advisors may also help you remain hands-off with your portfolio through tumultuous times in the marketplace by ensuring that your investments are satisfied with your risk tolerance.