Managing Your Money in an Uncertain World

Just six months ago, we all lived in a world of record stock returns and tight employment markets. Then came COVID-19, and unemployment exploded while the S&P 500 lost a third of its value in a month. Today, the markets still remain volatile with the Dow swinging hundreds of points on a daily basis.

SEE MORE Should You Retire During a Pandemic? 3 Things You Should Know

The future isn't always predictable, but by taking inventory of your budget and savings as you head back to work, you can be prepared in both the long and short term for whatever may come.

Basics of Financial Management

The first steps are simple. Determine what comes in each month and what must go out. Also, be sure to understand your health insurance, such as whether it has a high or low deductible and whether you need to make contributions to your health savings account. If you were getting insurance through your employer, and have lost that coverage — or your extended post-employment COBRA coverage is coming to an end — you will need to look at other resources for affordable replacement coverage. Depending on your current financial status, you may be eligible for coverage through your state's assistance plans or under the Affordable Care Act. Many agencies can help you find a plan if you aren't comfortable working on your own.

Having accomplished this, turn to saving for emergencies and retirement, and — only then — save for discretionary spending.

Planning for the Unknown

Once you head back to work, it's time to take a fresh look at your budget and emergency fund. Your income may well have changed, and your work-related expenses may have changed as well. Both of these can impact how you need to manage expenses now. If you aren't sure how to do this on your own, you may want to look at a money management app to help you control both expenses and debt. Regardless, once these basics are under control in your changed circumstances, it's time to plan for emergencies and retirement, and consider ways to return to work safely.

Plan for emergencies:

COVID-19 has proven that no job is guaranteed. The last six months about 58 million people have sought unemployment benefits, and unemployment remains high today. So, even if you're going back to work, an emergency fund is still essential. Ex

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States With Scary Death Taxes

Most people shouldn't be afraid of federal "death taxes." For 2020, only estates worth $11.58 million or more ($23.16 million or more for a married couple) are slashed by federal estate taxes, and only a small percentage of Americans have accumulated that much wealth. Plus, there's no federal inheritance tax to spook your heirs. (Estate taxes are paid by the estate and based on the estate's overall value, while inheritance taxes are paid by an individual heir on whatever property they inherit.)

But don't feel too comfy if your assets are below the federal estate tax threshold—a tax bill from your state could be lurking in the shadows. While a number of states have reduced or eliminated their death taxes over the past decade or so to dissuade well-off retirees from moving to more tax-friendly jurisdictions, 12 states and the District of Columbia still impose an estate tax and six states have an inheritance tax on the books. (Maryland has both!) So if you don't know boo about death taxes and live in one of the states listed (alphabetically) below, beware. Your heirs could be haunted by a state tax collector.

SEE MORE State-by-State Guide to Taxes

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Don’t Let Low-Interest-Rate Fatigue Push You into Taking Too Much Risk

One of the best things about long-term investing is that just about anyone can do it.

SEE MORE Protect Your Wealth with Smart Risk Management Strategies

Yes, the stocks in your 401(k) or IRA are bound to dip, or even dive, from day to day or month to month. And that can be scary. However, disciplined investors historically have been able to count on the right mix of high-quality stocks and the magic of compounding to grow their money over the long term.  

But what about saving and investing for goals (or needs) that have a tighter timeline? Where can you put your money for short-term safekeeping and still get a competitive rate of return?

Ah, the Good Old Days

It’s been decades since you could waltz into a bank or credit union and buy a nice, safe certificate of deposit with an interest rate in the double digits. These days, you’re lucky to get 1.25% for a 36-month CD. Bonds can be similarly disappointing. And a good old-fashioned bank savings account, with an average interest rate of 0.1%, according to Bankrate, will give you safety, but not much else. 

Unfortunately, it’s been that way for a while now — and it doesn’t look as though it will be changing anytime soon.

The result? Investors with low-interest fatigue have been searching for short-term alternatives, and many have turned to riskier choices in their quest for higher returns.

SEE MORE What to Do with Cash in a Low Interest Rate Environment

What could go wrong? We found out when the stock market’s record-setting bull run came to a dramatic end this year. Though the market bounced back quickly from those initial March 2020 lows, investors who panicked and retirees who needed income still sold at a loss. Imagine what would have happened if the market had taken months, or even years, to recover. Hopefully, the experience will lead some to rethink the amount of risk in their portfolio and to find a better way going forward. 

Reduce Your Risk with a Real Plan

So, what is that better alternative?

Maybe worry less about individual short-term investment products and more about comprehensive planning.

Because the options are so limited, finding quality investments to meet short-term goals or to fill an income gap can be a challenge. But if yo

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