How do you focus on financial wellbeing in the in the middle of a pandemic?
Whether you're looking for prescription measures or a bit of preventative medicine, don't delay sustainable financial wellness planning. Undoubtedly, this can prove to be the basis for multi-generational prosperity.
As you suspect, most have focused on short-term challenges. For the past nine months, the economic crisis triggered by the pandemic has exposed the financial fragility of households across our country. Millions – especially African Americans, who are hardest hit by the current environment – have moved into survival mode due to several pressing factors: job insecurity, income disruptions, scarce reserves, and inadequate financial control.
The 2020 Prudential Financial Wellness Census, a survey of 3,000 US adults from three generations – Millennials, GenXers, and Baby Boomers – shows that a nation is evenly divided between financially healthy and struggling people. In addition, the census found that nearly half of Americans have shaken their confidence and believe that their own "financial mobility is fixed".
Just as it took a large number of African American households up to a decade to recover from the financial shocks of the Great Recession, they have now been forced to grapple with the devastating effects of COVID-19. While many may find long-term planning to be counterintuitive during these extraordinary times, experts claim that today is the best time to plan for your family's financial future. In fact, this can prove to be myopic and even harmful.
“If you live in this moment, you may have lost your job, cut your hours, or got sick, you may have some disabilities. Worst of all, the death of a loved one,” said ShirleyAnn Robertson, a second financier Generation who started their careers at Prudential before starting their Schaumburg, Illinois-based company. "I say short term means you are very diligent with your cash and (reviewing) all of your expenses to make sure you really maximize the discounts you can get. Now we are transcending the dollars we save in money to meet long term needs and care for you and your family. "
Robertson was one of the panelists at the recent Prudential-sponsored V Summit of Black Enterprise Your Money Your Life. What Should You Consider As You Prepare Your Wellness Financial Legacy? Before getting into the planks of your plan, let's share what it means to achieve this status.
According to Prudential.com, there are three pillars that will help anyone improve their financial well-being:
1. Manage daily expenses
The first pillar of wellbeing is learning how to manage your budget, understand your creditworthiness, and build emergency savings in the short term so you can better deal with the daily ups and downs of life.
2. Set and achieve financial goals
Regardless of your stage in life, ask yourself the following questions: Do you know how much you have saved for retirement and how much retirement income you are likely to have? If you're not saving enough, do you have a plan to get there? Do you use employer-sponsored retirement plans? While retirement is just one example, setting and achieving short and long term financial goals are important components of overall financial health.
3. Protection against risks
The last pillar protects against serious, unforeseen financial disruptions and setbacks. You have the resources to tackle challenges like catastrophic illness or injury, or premature death
of a spouse or breadwinner, or loss of income due to a public health crisis and other natural disaster. Bottom line: you remain financially resilient because you have carried out proper strategic planning.
Keep lifestyle in mind as you continue your wellbeing. For example, the Prudential Wellness Census for 2018 found that African Americans at all income levels were more likely than the general population to "give a priority to helping others financially – looking after parents or other family members, offering their children tuition fees, and helping children with a disability pay for." a house, leaving an inheritance to their heirs and donating to charity. “Therefore, such tendencies should be considered in any planning.
Tiffany "The Budgetnista" Others
Tiffany Aliche, a finance professional named "The Budgetnista," who runs the Live Richer Academy, says using a financial planner is invaluable in defining your goals and developing and executing strategies to achieve those goals. Aliche also claims that keeping your financial status up to date is also important. "It's very important to keep in touch as you develop and grow. It's like going to the doctor. At 40, you don't see your pediatrician. You don't have the same body. You want to grow with your financial planner. "
Life insurance should be an important part of your planning and inheritance. For one, it serves as a means of providing income and financial support to your family in the event of a premature death. According to Prudential.com, “a general rule of thumb is to get sufficient life insurance to cover 10 to 20 times the policyholder's annual salary. If someone makes $ 50,000 a year, they should get $ 500,000 to $ 1 million in life insurance. If you can opt for discounted group life insurance as part of your benefits, you should do so – but also consider getting extra life insurance outside of work to make sure you are covered. "
Robertson reveals a personal experience to show his worth. “My uncle was 68 years old, was enjoying retirement, suddenly had a massive heart attack and died. Who is left? His wife and family. The life insurance check can protect this family and my aunt's situation. Top that now with someone in their thirties. That's why I always say, look at it from a point of view that if you're not here, how is your family going to survive without you … without the dollar you bring into the household? "She says." Generational wealth begins with you and I talking. What constant amount can you afford each month? We take those dollars and convert them into life insurance that we can keep with your family within a few days at the time of your death Check out to make sure their life is lasted. Using a small amount of dollars becomes a huge payout. I don't mean you will benefit from the death of someone, but this way you leave your family intact for them at this moment the financial crisis is not endangered. "
According to the 2018 census, African Americans rely more on insurance than inheritance to pass wealth to future generations. The transfer of wealth to the next generation is a more common goal for blacks than for the general population. Higher-income black Americans were more likely to say they are likely to pass wealth through life insurance benefits, while higher-income Americans in the general population are more likely to expect to leave an inheritance. The study found that history plays a huge role: 28% of higher-income African Americans surveyed admit they have received life insurance policies and received payouts, up from 21% of the general population. And a 2017 LIMRA study found that 47% of African Americans believe household members should have more life insurance than 41% of the general population because they rely more on life insurance to pass wealth on to future generations than other groups.
African Americans tend to have fewer emergency and retirement assets than other groups. According to the 2018 census, 57% of African American households surveyed have no savings earmarked for retirement at all, up from 44% of the total population. Among those found to have retirement assets, the average grand total is $ 23,000 for African American households compared to $ 154,000 for general population households – and these are pre-pandemic numbers. These differences were attributed to lower income, lower participation in workplace savings plans, and higher rates of use of discretionary income to support family members. Only about 45% of higher-income black households – and only 20% of lower-income black households – have accounts in an employer-sponsored defined contribution savings plan
To achieve wellness, African Americans must view 401 (k) and others like these plans as critical to a financially secure retirement. Americans had roughly $ 5.6 trillion invested in their 401 (k) accounts by March 2020, reports the Investment Company Institute. And recently the Dow Jones Industrial Average topped 30,000, meaning millions have missed out on significant returns even in times of economic downturn. Therefore, it's imperative to get as much value as possible from company retirement plans.
Building a financial wellness legacy begins with mindset and conversation. Participate in disciplined practices that include daily budgeting, long-term goal setting, saving and investing, and protecting assets. Discuss money matters with family members and pass these principles on to the next generation. And don't forget to schedule financial reviews on a regular basis. By taking action, you can ensure your family's long-term financial health.