Morgan Stanley
  • Wealth Management
  • Dec 7, 2020

Hindsight Is 2020: Now’s the Time for a Financial Reset

As we wrap up the year, we owe it to ourselves to pause, check in on our finances, and strive to get on more stable footing for the road ahead. Here are some questions to ask yourself.

If you had asked me a year ago what I’d be doing in 2020, I might have told you about my upcoming professional projects, volunteer engagements, and travel plans. I never could have imagined that we’d be facing a global health crisis and the economic fallout thereof.

As the leader of a Financial Wellness business, I could have also shared some predictions about the changing nature of work, but I could not have anticipated the complete overhaul we’ve experienced. In my role, I am acutely aware of what the events of 2020 have meant for everyday American workers: In short, we’ve been through it. Many of us have been in stopgap and survival mode, just trying to put food on the table or make our next rent payment. 

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So as we wrap up the year, we owe it to ourselves to pause, check in on our finances, and strive to get on more stable footing for the road ahead. Here are some questions to ask yourself.

What’s the State of Your Savings?

The conversation around emergency funds has become increasingly fraught in recent years. While it is important to have money saved for unexpected expenses, it’s not exactly constructive to tell cash-strapped people they need an emergency fund while an emergency is already upon them.

Here’s the candid truth: Yes, it’s a good idea to have at least 3-6 months’ worth of expenses saved up. But the unspoken addendum is that you’re not expected to snap your fingers and have the full amount in hand. This is a goal you can work towards over time.

Take a good look at your credit card and bank statements. If you’re spending less now because you’re not going out to eat every weekend, putting gas in the car as often, or going on pricey vacations, you may be able to steer some of that money towards your emergency fund. Bit by bit, you can build up to your target.

And if you did need to dip into your emergency fund given all of this year’s hardships, aim to top it back up once your income has stabilized. Hindsight really is 2020, and this year has given us plenty. If you’re able, start preparing for the next time you might need extra cash.

How Has Working from Home Impacted Your Finances?

While our essential workers have been holding it down on the front lines, some 42% of the American labor force is now working from home full time.1 And a third of employers expect half or more of their employees to continue working from home even after their business operations get back to normal.2

Remote work can mean different things to different people. For some it’s been a welcome change—and one that can save a lot of money. While you might be racking up higher electricity bills since turning your home into your office, on average, working from home can save you $4,000 year.3 A protracted break from expensive commutes, $13 salads and dry cleaning can really add up.

Now is a good time to take an itemized view of your spending before and after you began working from home to see if you’ve experienced cost savings—and to think about how you might allocate that money to other financial obligations or goals. Can you chip away at credit card debt, or sock away a little more for retirement?

To be sure, for others—especially those with children or elder loved ones in their care—working from home has posed its share of challenges. To help alleviate some of the financial and emotional burden, see if your employer offers dependent care benefits as well as benefits related to your mental health.

To That End, Are You Taking Full Advantage of Your Employee Benefits?

These days, there are plenty of resources—from online portals to educational seminars to one-on-one coaching—to support workers’ personal financial wellness. A recent study found that half of employers offer programs and benefits to help improve employees’ financial well-being, and a quarter of those not offering them now plan to in 2021. What’s their top reason for doing so? Employee demand.

The upshot is that if you don’t have certain benefits available, talk to your employer. Besides doing right by you, offering these resources helps them get a less stressed, more focused version of you. And when you’re less financially stressed, you’ll be better able to utilize the other benefits they sponsor that can contribute to your financial health, such as the company 401(k) plan or an employee stock purchase plan, if available.

Are You Prioritizing Your Wellness, Beyond Your Finances?

If 2020 has taught us anything, it’s that our health and safety, and that of our loved ones, are what’s most important. My mom is a nurse, and she taught me that money is an enabler of both needs and wants, but you can’t put a price on your well-being. As we wrap up the year, evaluate your insurance coverage, from health to disability and perhaps even long-term care. Explore and consider using any available employee benefits related to physical fitness and mental health. Be gentle with yourself.

The Bottom Line

Most of us are eager for 2021, if only for the symbolic hope a new year can bring. And for good reason—we have experienced a collective trauma this year, and many have faced personal traumas as well.

When you’re in triage mode, it’s natural to lose sight of the big picture. I encourage you to use this time to reflect on what’s changed in your day-to-day life, including your financial life. And if you have had to put your goals on pause, start thinking about the small first steps it will take to get back on track. Now more than ever, you deserve a healthy dose of financial self-care.

A version of this article originally appeared on "MarketWatch.” 

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