In the US and abroad, the coronavirus has affected nearly every aspect of life as we know it. Even those who have been fortunately healthy during this time have likely experienced financial stress due to COVID-19. From market fluctuations to layoffs and furloughs, to significant drops in retirement funds overnight, much is uncertain.
Here are some questions to help you decide whether investing makes sense in a time like this.
What Does Your Cash Flow Situation Look Like?
While it’s noble to have a goal to be a millionaire by the time you retire, it isn’t going to help you much right now if you can’t put food on the table. For now, it’s fine to think of your short-term goals first (rent, groceries, expected health expenses), then you can look towards the future.
Now’s the time to look at what’s coming in and out of your bank account daily, weekly, and monthly. Are you still earning enough to meet your basic needs and then some? Do you need to cut back on expenses here and there?
If you have plenty coming in and you’re a generally frugal person, then it might be OK to take some of that money to invest. Generally speaking, there is no bad time to invest in the stock market. there’s no wrong time to invest in the stock market, and the sooner you do it, the better, because the longer it sits and appreciates in there, the more you’ll have stockpiled for retirement.
While we love all the benefits of investing, the facts remain: it is crucial to make sure you’re not investing more than you can afford. And if you don’t have a solid stash of emergency savings, it may not be the right time to invest at all. For more about how to best decide your investing capacity (and info on meeting minimums, diversifying your portfolio, and avoiding feeds), read up here.
Do You Have an Emergency Fund?
If something happened to your financial life as you know it tomorrow, would you be able to take care of yourself and/or your family for the next few months?
Many experts will tell you to have at least a few months of expenses set aside in case you lose your job and have no other source of income. Or if there’s an unexpected circumstance (like your roof caving in) and you need cash fast. Enter: your emergency fund.
Remember earlier how we spoke about taking care of your short-term needs first? Well, that still plays here. If you don’t have a financial cushion, then investing is probably not the right move for you right now. Sure, you could see some great returns in the market over time, but right now, keeping yourself and your family safe and out of financial trouble is paramount.
We don’t know how long the pandemic and its effects will last, so if you lose your job, you need to be ready. Stash away some extra cash and aim to have more than the usual 3-6 months worth of funds most experts suggest.
Do You Have an HSA?
Let’s say you’re building up that emergency fund and trying to gauge whether you’ll have some income coming in the next few months. That doesn’t mean you can’t invest. All you need to do is to take a look at your trusty HSA and use those funds.
How? Many of these accounts (including Starship HSA) offer an option where you can take the funds you’ve parked towards different types of investments. That way, you’re not using “extra” cash per se, you’re simply maximizing what you’ve already got.
Hopefully, this gives you some guidance as to whether or not it makes sense to invest. Of course, only you know your individual situation best—at the very least, consult a financial professional for help.
No matter what you decide, take care of yourself. And if you enjoyed this piece, be sure to share it!