Three Ways to Strengthen Your Finances in the Current Market

March 13, 2020
645 Views

The stock market is continuing to slide as Coronavirus threatens the U.S. workforce, healthcare system, and wider economy. Here are three things you can do to strengthen your finances in the current market.

1: Open a High-Interest Savings account

Every American should aim to build an emergency fund that is equivalent to at least three months of basic salary. The fund can be used in times of unemployment, healthcare emergencies, or when unexpected bills arrive.

If you have your fund saved in a standard checking account or low-interest savings account, consider moving it to a high-yield account. While rare, some banks offer high-interest accounts with rates close to 2%. Internet-based banks in America are more likely to offer better savings rates.

Check with your current banking provider, or explore accounts from banks like Citizens Access, Marcus by Godman Sachs, Synchrony, and CIT Bank.

2: Reduce Your Debt

Debt can be a real burden during uncertain economic conditions. The less debt you have, the more stable you will be in an unstable market. If you are holding off on the stock market during the current slide, you could divert money that you would use for trading into repaying your debt. This will decrease your total debt load, giving you more flexibility to borrow when you need to.

Decreasing your debt can also improve your credit score, just remember to keep old accounts active so that they are reflected in your reports.

3: Maximize Contributions to Your Retirement Fund

If you aren’t maximizing your retirement fund contributions, you can take this opportunity to ramp them up over the coming months. Coronavirus has impacted China since the beginning of the year, and it is only beginning to taper off in the Mainland. The spread of infection in the U.S. is only beginning, and it’s uncertain how effective containment measures will be. Stocks could be volatile throughout the second quarter, and you may wish to trade less and put more money away for your future.

If you have a 401k with employer-matched contributions, try to get these as high as they go. If you don’t have a retirement account, now is the ideal time to open a Roth IRA or traditional IRA.

Keep an Eye on the News and Avoid Panic

While stocks are seemingly in freefall this week, it’s not the worse that has been seen in the modern market. The underlying strength of the economy is still formidable, and before Coronavirus became a threat, earnings were strong.

Avoid reactive financial decisions without carefully considering all your options. With patience and careful investment/saving, you can minimize the impact of the current market rout.

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