Five Steps to Take After a Financial Setback

As we sail into 2021, many Americans are struggling with the aftershocks of financial setback. Whether it’s due to a layoff, a smaller workload, medical expenses or a change in family circumstances, the financial fallout of COVID-19 has been distressing.

Recovering from a financial setback, due to a pandemic or any other reason, is never easy; however, with hard work and the ability to look forward, it can be done. Here’s how.

Step 1: Assess the damage

Evaluate exactly how much financial recovery you need. Are you thousands of dollars in debt? Do you need to find a new job? What are the long-term financial implications?

Crunching the numbers and putting it all on paper will make it easier to take concrete steps toward recovery.

Step 2: Accept your new reality

Shock and denial are valid stages of grief for any major loss or setback, but for recovery to be possible, it’s important to reach a place of acceptance. You can vent to a close friend, express your feelings in a journal, de-stress with your favorite low-cost hobby and then let go. Constantly harping on what could have been will only drain you of the energy you need to move on.

Step 3: Outline your goals

Clearly defining your goals will make it easier to go forward. Are you looking to rebuild a depleted emergency fund? Find gainful employment? Pay down your medical bills?

As you work through this step, choose goals that are SMART:

Specific

Measurable

Attainable

Realistic

Timely

Step 4: Create a recovery plan

Your plan should consist of consecutive steps that lead to a life of complete financial wellness. Here are some steps you may want to include:

Trim your spending until you can spend less than you earn.
Build a small emergency fund to help get you through an unexpected expense.
Seek new employment or new income streams.
Start paying down debts.
Save more aggressively, with one eye toward your retirement and another toward a large emergency fund with up to six months’ of living expenses.

Step 5: Make it Happen

Put your plan into action! If you were careful to set goals that are SMART, you should be able to take the first steps in your plan immediately.

Millennials Hit Hardest by Coronavirus Recession

The coronavirus recession hasn’t been easy on anyone, but millennials may have been hit the hardest.

Here’s why the coronavirus pandemic has been especially hard 25- to 39-year-olds:

Another recession

For millennials, economic recessions are nothing new. This generation has already lived through the Great Recession of 2008, the impact from which is still being felt today.

The Great Recession hit millennials when they were still in college or just starting out on their career paths. For some, it meant the choices for their first post-college job were slim. For others, it meant dropping out of college when there was no longer a guarantee of a degree netting a high-paying job. Regardless of how they were impacted, many are still playing catch-up.

Job losses across the board

More than 40 million workers in the U.S. have filed for unemployment since the beginning of the pandemic, and millennials have been hit harder than most.

According to a report by Data for Progress, 52% of respondents under age 45 have lost jobs, been furloughed or had their work hours cut due to COVID-19. In contrast, just 26% of respondents over age 45 have suffered a job loss during this time.

The economy shed 20.5 million jobs in April. Of these, 7.7 million were in the leisure and hospitality sector — a sector dominated by millennials. An additional 1.4 million lost jobs were in health care, primarily in ambulatory services — another field that employs a large amount of millennials.

No nest egg

Many millennials are carrying piles of debt and have minimal or no savings. According to surveys conducted in 2018 by the Federal Reserve, 1 in 4 millennial families have a negative net worth, or debts outweighing assets. One in six millennials would not be able to find the funds to cover a $400 emergency. For these young employees, a relatively mild setback from the coronavirus can be devastating to their finances.

Can Millennials recover?

Millennials have been hit hard again, but there is hope. The forward-thinking millennial can use the challenges presented by COVID-19 as an opportunity to move onward toward a brighter future.

Should I Buy a House During a Pandemic?

Q: I’d planned to buy my first home this spring — and then the coronavirus changed everything. Should I forget about my plans, or can I buy a house during a pandemic?

A: The coronavirus outbreak that has swept through the world has given rise to dozens of financial questions. No one can say when this pandemic will end, or the lasting impact it will have on the economy. Experts can only look at past economic crises in an attempt to predict what the financial future will look like in the United States.

Let’s explore the mid-pandemic housing market and the wisdom of purchasing a home during a time of economic instability

The home sales of February 2020 were the strongest they’ve been in the country since 2007, topping 5 million sales. Factors, like falling interest rates and a booming economy, contributed to the thriving housing market. But two months later, experts are already seeing a sharp decline in buying.

This downturn has likely been triggered by the economic devastation caused by the outbreak, including widespread job insecurity, thousands of shuttered businesses and millions of employees on leave from work.

The decrease in home sales is also likely due to practical reasons. When people are worried about their health, it’s difficult for them to think about purchasing a new home. Meeting with potential sellers, real estate agents and looking at properties is also complicated when trying to maintain social distancing.

A dwindling housing market does not automatically mean this isn’t a good time to buy a house. In fact, times of financial uncertainty generally lead to falling mortgage rates and the ease of credit qualifications. Mortgage rates have already reached a record low of 3.13 percent in the beginning of March, prompting some buyers to rush into new home purchases.

Some market experts also believe the coronavirus pandemic will cause an eventual spike in home sales as buyers, fearing a recession, will want the stability and control that homeownership brings.

Before you jump into a home purchase at this time, you may want to consider the following factors:

How stable is your income? If you have reason to believe you might be laid off soon, you may want to hold off on your purchase.
How long do you plan on living in this home? If you plan on selling within the next few years, you may come out at a loss due to a falling housing market and an unstable economy.
Will you have savings left after buying a home? As the economy heads toward a probable recession, this is not the best time to be without a savings cushion.

If you can afford the purchase, and your income isn’t threatened by the economic instability, the favorable interest rates and looser qualifications during this pandemic can make it a good time to buy a new home.

What’s a Recession Anyway?

You’ve likely caught the term “recession” thrown around on the news in the last several months. But, do you know the exact definition of a recession? How is it different from a depression? How long do recessions last?

So many questions — and we’ve got answers! Here’s all you need to know about recessions.

What is a recession?

A recession is a widespread economic decline in a designated region lasting several months or more. In a recession, the gross domestic product (GDP), or the total value of all goods and services produced in the region, decreases for two consecutive quarters. In most recessions, the GDP growth will slow for several quarters before it turns negative.

What’s the difference between a recession and a depression?

A depression has similar criteria as a recession, but is more severe. For example, in both a recession and a depression, the unemployment rate rises; however, during the Great Recession of 2008, unemployment peaked at 10%, while during the Great Depression, unemployment levels soared to 25%.

Depressions also last longer than recessions. The Great Depression officially lasted four years, but continued to impact the economy for more than a decade. In contrast, recessions last only about 11 months, according to data from the National Bureau of Economic Research (NBER) .

Why the COVID-19 recession is unlike any other

The COVID-19 recession, also known as the coronavirus recession, is unique because it was not sparked by any inherent problem within the economy.

Another anomaly of the coronavirus recession is the super-healthy state of the economy before it hit. In February, unemployment levels were at a 50-year low, stock markets were at a record high and the U.S. economy had enjoyed its longest period of growth in history.

The unusual triggers and the explosive start of the current recession may be good news for its end. An April Reuters poll found that nearly half of 45 economists believed the U.S. recovery would be U-shaped; meaning relatively quick.

How will this recession affect me?

The coronavirus recession can impact the average consumer in multiple ways.

First, many are struggling with sudden unemployment or will be facing joblessness in the coming months. The most recent data from the Bureau of Labor Statistics show the unemployment rate at 10.2%.

Secondly, the economic uncertainty has triggered record-low interest rates, which in turn sparked a rush to refinance. If you are currently paying high interest rates on a long-term loan, you may want to consider refinancing for a lower monthly payment. Explore our current rates by clicking here.

Finally, investments in stocks, bonds and real estate may lose value during a recession.

If you are experiencing financial difficulties of any kind, feel free to reach out to us to see how we can help.