There's no doubt these are challenging times. Even as an essential worker, it's likely your financial picture looks a bit different than before COVID-19. And that's not considering the changes to your practice—virtual office visits, sanitizing protocols, precautions for patients and deliveries, and more—which may have affected your bottom line.
Whenever there's a crisis, focusing on these basics can help provide some stability and control over your finances.
Assess Your Financial Health
Just as taking care of your physical and emotional well-being is important, it's critical to check the health of your finances regularly, especially when there are changes in your circumstances.
- Review your credit reports for accuracy.
- Update your inventory of financial assets (stocks, bonds, savings, etc.) to keep track of everything you own.
- Keep important documents on homes, vehicles, stocks, bonds, insurance documents, etc., where they can be found easily.
- Evaluate net worth (total assets minus total liabilities) to get an objective view of your finances.
Now, let's address the essentials of financial stability... and possible changes due to the pandemic.
Update Your Budget
Understanding your income and expenses is critical to living below your means and accumulating funds for your future. A budget can help keep you from spending more than you have coming in, creating funds for savings and investments.
Due to the pandemic, you may find some expenses in your budget have changed. For example, you may not be dining out but need to increase groceries. Pay attention to variable expenses (those that fluctuate monthly, like gas, entertainment, etc.). Reduce spending where you can by determining what's essential in your budget. Cancel or reallocate these expenses to create a budget that's more appropriate. There are many online tools that can help. Mint, a free personal budgeting tool, is one of the most popular.
Helpful resource: Budgeting 101
Plan for Emergencies
Emergencies are never expected and create unplanned expenses. That's why it's important to do what you can to alleviate those financial crunches with an emergency fund.
The goal is to keep unplanned expenses from interfering with your budget, which could cause you to borrow or use credit unnecessarily. When possible, it's a good idea to incorporate some frequently overlooked expenses in your budget, like car repairs and new appliances, so they don't end up consuming your emergency fund.
Obviously, no one could plan for this pandemic. So, if you need to draw from this fund, remember that's why you have it! Just rebuild it again as soon as you can.
Helpful resource: Emergency Fund: What It Is and Why It Matters
You may find it difficult to reduce debt right now. The key, then, is to avoid adding to your debt. Many companies are working with customers to help them work around their bills and reduce interest fees during these challenging times. It may be worth contacting your creditors to see what options you have.
Of course, it's best to determine what you owe and plan to pay it off as quickly as possible to build your wealth. Whatever you determine works best for your budget, develop a repayment plan, and stick to it.
Helpful resource: Pay Off Debt: Tools and Tips
Insurance is critical to safeguarding assets, supporting loved ones, preserving your practice, securing identity, and providing peace of mind. In fact, having adequate insurance can help mitigate financial risk, which is a critical part of any financial strategy. That's because insurance can be helpful in sidestepping unnecessary financial risk from life's unexpected curveballs.
If you're procrastinating or telling yourself the problem (whatever it is) won't happen to you, consider the potential effects it could have on your loved ones and practice if you don't take advantage of this tool. By the way, if you're in your third or fourth year of residency, ACOG offers a complimentary $100,000 life insurance policy and $1,000 in monthly disability income insurance benefits.
Helpful resource: ACOG Member Insurance Self-Service Portal
Returning to the basics will help you regain financial control in these challenging times. And, though revising your budget may be needed, the sooner you make the changes, the better you'll feel as you head in a more positive direction. So, don't wait. Take steps now to help assure your financial future.
The purpose of this article is to provide information, rather than advice or opinion. It is accurate to the best of the author’s knowledge as of the publication date. Accordingly, this article should not be viewed as a substitute for the guidance and recommendations of a retained professional. Any references to external websites are provided solely for convenience. The ACOG Member Insurance Program disclaims any responsibility with respect to such websites.