(NYTIMES) - The pandemic swept many people into uncharted financial territory. Whether your bank account bulged or dwindled during the long months of lockdown, now is the time to take stock of your financial situation and decide your next steps.
"We've been getting a lot of clients who say, 'I really need to think about this now,' " said Ms Pam Capalad, a certified financial planner based in New York City. "Either the pandemic was a wake-up call and it really turned their finances upside down, or people got through it okay and now they're saying, 'I need to figure out what is next for me.' "
Depending on your financial situation and priorities, what you do now will vary. But there are several ways to put yourself in a better position financially for whatever comes next. Here's how to get started.
First, don't rush it
The trauma of the past year has been extraordinary, and for many people, their initial impulse may be to plunge in and make travel plans and purchases to make up for lost time.
"People feel like life was stolen from them, and an increase in spending often comes along with that," said Mr Brian O'Leary, a private wealth adviser.
But if there was ever a time to re-evaluate priorities and align your spending and saving behaviour with your values, that time is now, experts say. Is your career on the right track? Do you like where you live? Are you happy in your relationships?
The pandemic may have helped people think about saving differently, focusing on what brings them joy, said Associate Professor Inga Timmerman at California State University.
If you're thinking of switching careers, starting your own business or making some other major life change, there may be a financial cost, at least in the short term. At a minimum, "you should have a spreadsheet with the bills and things you need to have covered regardless of how the business or side hustle does", Prof Timmerman said.
Try to have a good idea of how many months you can cover those bills out of your savings, she said, or what you'll do instead to pay them. It might mean selling a car or moving into less expensive housing.
Assess three things
Whether you're dreaming of turning your pandemic side hustle into a new career and need to determine how to pay for it, or you simply want to feel you're on firm financial footing, planners say there are generally three major financial areas to evaluate first.
"If someone has an emergency fund, no high-interest debt and is saving a decent amount for retirement, they're in a good position to make big changes," said Mr Brian Walsh, senior manager of financial planning at SoFi, an online lending start-up. "If they don't have those boxes ticked off, they should be more careful."
1. Build up emergency fund
In the past, planners have generally recommended that people have three to six months of expenses in an emergency savings fund to carry them through tough times. Some now suggest that fund should be able to keep you afloat for up to a year.
"Now, the advice is even more conservative," said Mr Dan Herron, a certified financial planner and co-founder of Elemental Wealth Advisors.
Your emergency fund should cover basic expenses such as rent or mortgage payments, utilities, food and transportation. You should also set aside enough to cover monthly health insurance premiums and car or home owners (or renters) insurance as well as credit card or other debt payments.
Whether your savings are healthy or you're trying to shore them up, the same advice applies: Set a monthly savings goal and stick to it. Even better, have the funds automatically withdrawn from your bank account every month and deposited in your savings, retirement or brokerage account.
2. Reduce credit card debt
If you are carrying a high credit card balance, now is a good time to consolidate that debt by transferring balances or signing on with a debt consolidation service that will allow you to make a single payment monthly.
Interest rates are as low now as they're likely to be for the next few years, said Mr Tony Molina, a certified public accountant and senior product specialist manager at Wealthfront, an online investment advisory company.
3. Save for retirement
If you're one of the lucky ones who increased your savings during the pandemic, don't stop now.
Earmarking some of that money for retirement can be a good strategy. Depending on how close you are to retirement and whether your projected savings will meet your expected needs, your approach may vary. A financial adviser can help you figure out the best plan for you.
Ms Capalad encourages her clients to increase their retirement savings incrementally. If every six to 12 months you increase your retirement contributions by 1 per cent, you'll build up that balance, but the extra withholding will only be "a blip in your pay cheque", she said.
One way to increase savings is to reduce spending that may have ballooned during the long months of isolation. Do you really still need subscriptions to every streaming channel on your TV? Maybe it's time to cut back on virtual yoga classes now that your gym has opened again, or to cancel your food delivery services.
For some, online retailers became not only an essential way to order necessities but also an easy means to buy stuff that was not necessarily needed.
Ms Capalad suggests to clients who want to break the habit of making impulsive online purchases that they put items they want in their cart, but not purchase them right away. Then pick one day a week to go through the cart and re-evaluate whether they really want those things.
Spending decisions aren't just about money, of course, but about how you want your life to be going forward.
"I have some clients who say they're never going to order wine at a restaurant again," Prof Timmerman said. They'd rather uncork a bottle at home and invite their friends over for takeout, she added.
Protect yourself and your family
The pandemic brought into sharp relief the fragility and unpredictability of life, and provided an object lesson in the importance of estate planning.
In addition to a will, your plan should include documents that detail your wishes for medical treatment and decision-making if you're unable to communicate that yourself. Depending on where you are, these may be called living wills, healthcare proxies or medical directives.
Ms Dana Menard, a certified financial planner, advises that now is also a good time to reassess your life insurance coverage. How much you need will vary depending on what you own, what you want to protect and your life circumstances.