Big picture planning during a pandemic

Ugh. As if COVID-19 weren’t creating enough distress — now that 2020 is finally ending, we have to untangle the financial messes this year has created. It’s time to review the big-picture aspects of our finances, while it’s still possible to correct course.

For some people — perhaps most — this year has ranged from difficult to devastating. If that’s you, it may seem there’s not much point in a financial review, given the dire prospects you might be facing. Nothing could be further from the truth. No matter how difficult the exercise may be, understanding your financial data is more critical now than ever.

On the other hand, if you’ve held on financially, or even prospered by paying down debt this year, a review is equally important. You want to build on your success, while planning for the possibility that next year’s fortunes could change.

This exercise also matters because a solid understanding of your numbers lets you better evaluate your options when it comes to career and job search decisions.

Following are six key areas to review (plus a miscellaneous category) before the year ends.

1. Income taxes. You’re almost certainly going to file taxes, but this year may not look like any other. For example, even though the recently-increased standard deduction might seem like the logical course, it’s worth checking to see if work-from-home expenses would change the equation. Other tax considerations may include unemployment payments (they are taxable as income) and CARES Act grants you may have received as a business owner or gig worker. This is still a murky area, so you might be advised to hold off on filing once you’ve prepared your materials — just in case the rules change in your favor after the new year.

2. Health insurance.

If you’re new to the market after losing employer coverage, then this is an important time period for you. Whatever insurance you started after the layoff — COBRA, coverage from a spouse, Medicare, or a policy through the ACA, you’re likely in a renewal period right now. Consider using a broker or other adviser to help sort out your options and make a plan for next year. Now is also the time to review contributions to your health savings account.

3. Retirement. Are you still on track for your original retirement date? OK, stop laughing — if you didn’t have a date to begin with, or if your timetable has been tossed to the wind, this might seem like an ironic exercise. Do it anyway, just for the practice. Review your contributions so far to determine if anything more can go in, while also running scenarios to see what kind of damage this year has done to your original plans. Having this data will help down the road as you make other decisions.

4. Debt. For some, the end of this year will also mean the end of student loan or mortgage forbearance. This is likely to be painful, so take some time now to review the terms of the forbearance. If there are extensions or other measures you can take, you may want to get started. This is also a good time to review the rest of your debt, in case something can be consolidated or paid off with other assets.

5. Housing. As the largest asset / debt / expense on most families’ ledgers, housing really should be reviewed on an annual basis. Issues to explore include relocation, downsizing, refinancing, subletting or renting unused space, and anything else that can relieve some of your housing cash flow burden.

6. Work. If you’re unemployed — and especially if your unemployment income is coming to an end — it may be time to pick up whatever interim work seems viable for the current situation. Don’t forget to negotiate the wage or salary, just in case it will bump up. If you’re currently working, consider a conversation with your manager to discuss a raise or other added compensation.

7. Miscellaneous. A final few items for your yearend financial review: Top off your charitable giving if you can; check the rates on all your insurance policies; consider replacing your car to take advantage of favorable pricing.

And, while I hate to end on a somber note, don’t forget to buy life insurance if someone else depends on your income. With the pandemic still surging, extra peace of mind may be worth the price of the policy.

There’s more to financial planning than just the big picture issues. Come back next week and we’ll look at cash flow and decisions you can make now to stretch precious resources over the coming months, with or without a job.