Even though we are doordashing dinner, our grocery bills are exploding and we’re buying new bikes… our checking accounts are unusually flush with cash and credit card bills are low.
We’ve been forced to save during COVID-19
On average we’re spending 25-30% less due to the coronavirus.
Businesses are closed and we are staying home. Spring and summer plans were cancelled and refunds are rolling in from flights, hotel reservations and summer camps.
What Should You Do With Your extra COVID Cash?
Be intentional with that money, fund your future happiness.
If you are wondering what you should be doing with this new found stash of cash (cache of cash?), I have some suggestions:
1. Let it ride
Most people don’t have 3 month's worth of family expenses set aside in an emergency fund. If you do now, congratulations. Now more than ever, the argument for having a sizable chunk in cash is becoming abundantly clear. Set this money aside for the unexpected.
2. Upgrade Your live/work space
If you have been considering updating your furniture, splashing some new paint on the walls, or turning an extra bedroom into a study … now is the time to do it. You will likely be spending more time working from home in the future. And your kids are going to be schooling at home in the coming years (including your college kids). It all adds up to many more hours a day in your house. You might as well take the time to make it as comfortable as possible. Talk to a local designer or use an online tool. We’ve been using Havenly.
3. Upgrade your yard
Just as important as your inside living space, is your outside living space. Now is the time to invest in beautifying your yard. There are added benefits as well, as gardening is a wonderful outlet for any extra time you may have. And it is also helpful work for finding mental head space/peace.
4. Get Your Credit Cards in Control
If you have let your credit cards get a bit out of control, now is the time to pay them down, and assess what you really need to be spending. Part of that is getting control of those recurring needling $8-$100 expenses that get lost on your credit card bill. Now they are suddenly super visible. Start canceling subscriptions. Get your credit cards completely under control.
5. Fund your 529s
Invest in your kid’s education. You can put $15k into each of your children’s 529s. I typically suggest aiming to have two year’s worth of in-state tuition set aside when the kids graduate from high school.
6. Fund your IRAS
Setting aside money for your long term financial planning, is always important, and should be done a set cadence. Now could be a brilliant time to fund your 2020 Roth IRA (as well as your 2019 if not yet done). And if you have been hearing about backdoor Roth’s, it is time to implement one. A good read on a back door Roth can be found at the White Coat Investor.
7. Fund your brokerage account
Adding money to your mid/long-term savings can also be done through a standard brokerage account. You will end up paying capital gains taxes, sure, but the market is the best way to earn money, when your time horizon is greater than 5 years. After depositing your money in the account, I suggest dollar cost averaging in over the course of the next several months. Pick a day of the month (I like to use the first of the month), and make your purchases, regardless of the daily results of the SP500. You need some sort of forcing function to make you follow through, in the face of an ever changing market. Not sure what to invest in? Get in touch with me to talk about what to buy.
8. Financially Support Equality + Social justice
Now is the perfect time to put your money to good use, fighting for social justice, right here in the USA. Put your money where your mouth is!
Be intentional with your money, and it can help bring you joy
This time of quarantines has been an instructive time. Use it as a level set to gauge what you really need to be spending. Your extra money, needs to find an intentional place in your life. Make it work towards your ultimate happiness. Don’t let it go to waste!