We covered a lot of territory in this column in the first half of a very unusual 2020—from managing your Thrift Savings Plan during a pandemic to exposing retirement myths that just won’t die. 

Here’s a look back at some key columns you might’ve missed:

Things You May Not Know About Annual Pay and Benefits Increases (Jan. 30)

The distinctions between COLAs and salary hikes, all spelled out in detail.

How (Not) To Retire During a Pandemic (March 19)

One more thing to put on hold during the ongoing coronavirus pandemic might be your plans for retirement.

How (Not) to Manage Your TSP During a Pandemic (March 26) 

It’s natural to be jittery, but now is not the time to panic, even if you’re close to retirement. 

In Case You’re Wondering What You’d Make in Retirement (April 2)

It’s not that hard to generate an estimate of how much your retirement benefit will be worth.

The Best Date to Start Taking Social Security Benefits (April 9)

An exploration of a surprisingly tricky question about maximizing your Social Security payout.

A Frequently Misunderstood Benefit (April 23)

Clearing up confusion and providing a comprehensive overview of the FERS supplement. 

The Value of an Annuity Supplement (April 30)

A close look at how the FERS supplement is calculated, and how that can change over time.

Retirement Myth Busting and More Retirement Myth Busting (June 11 and 18)

Persistent tall tales, misconceptions and half truths about financial planning and federal benefits.

People often rely on gut instinct rather than performance and other trends, when investing money. This is never a good idea because the security of the money you are investing is of utmost importance.

Risk is an inherent part of our everyday lives. Even the simplest decisions we make, whether personal or professional, are fraught with multiple risks. Hence, in one way or the other, we are all risk managers by default. If we had to define risk in plain terms, there would be the possibility of an unwanted outcome. Risk management helps to mitigate and control these undesirable outcomes with the use of advance planning.

In the modern world, risk and its management feature prominently in the domain of financial investment, making it necessary for consumers to understand the salient nature of risk in this area.

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  Non-life insurance companies’ gross direct premiums grow 7.83% to Rs 13,961.25 crore in June

Financial Investment Risk Management

Investing money has forever been a risky business. There is always the possibility of adverse outcomes and this can be due to myriad permutations and combinations. The health of the financial world is dependent on market forces and external factors like climate disasters, public health crisis, political crisis and much more. Hence, many people prefer to err on the side of caution while investing their hard-earned money. For consumers, proper risk management in financial investment hinges on asking prudent questions with the aim of reducing the overall risk of one’s portfolio. People often rely on gut instinct rather than performance and other trends, when investing money. This is never a good idea because the security of the money you are investing is of utmost importance.

In addition to understanding relevant risks, consumers should also be aware of the steps involved in assessing and managing those risks.

# Defining your goals and identifying risks: An individual must clearly define his personal goals, and what would constitute a positive outcome for them. Having a clear set of goals is vital to being able to correctly identify all potential risks. To identify these risks, consider not just the present condition but also potential future scenarios. Never underestimate any probable high-impact event; even if it seems unlikely to happen.

# Analyzing risk and developing a mitigation plan: One of the guiding principles in risk management is to consider all worst-case scenarios. This is somewhat contrary to our social set up where it may be considered inauspicious to talk about negative outcomes or “bad news”. However, unless we know the worst that can happen, we cannot plan anything to prevent it from happening at all. It is extremely important to have a back-up plan for future risk scenarios in case they eventually materialise.

# Enhancing decision-making skills: The most critical aspect of risk management is the execution of effective risk management actions. While one may not be able to avoid every potential risk, time and attention need to be focused on possible ways to minimise the impact. It is important to remember that there may not always be time to plan for threats that emerge unexpectedly, so it is essential to develop your decision-making ability, in conjunction with risk thinking, to be able to be resilient and adapt agilely to a developing situation.

These steps are key to successfully navigating risks. During times of uncertainty when the situation is fluid and dynamic, it can be very difficult to predict future developments and plan for everything in advance. But this does not mean that one should not, or cannot, plan for risks at all. Having a plan that takes into account all possible scenarios and the necessary courses of action makes it easier to adapt to any sudden changes in the landscape. Greater risk awareness and informed decision making can help in developing a financial risk mitigation plan which is more responsive to shifting trends.

The Covid-19 pandemic has jolted world order and upturned normalcy in every sphere. Financial markets have been in turmoil and jobs are in upheaval, causing uncertainty to percolate into our personal lives as well. If we are to be better prepared for these kinds of shocks in the future, inculcating a risk management focus is crucial in our personal as well as professional lives. This pandemic should always serve as a reminder that while crises can often be out of our control, being caught completely off guard is a choice we make ourselves.

By Hersh Shah, CEO, India Affiliate of Institute of Risk Management (UK)

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Young farmers can learn how to manage money, debt and dealing with banks through a new online workshop hosted by Agriculture Victoria.

The 90-minute workshop will help young farmers understand the finance options available to achieve their goals.

ORM senior consultant and workshop host Jane Foster will bring experience in farm debt management and financial data analysis.

“Understanding where to start with agricultural financing can be overwhelming, so I’ll offer some tools and knowledge to help young farmers feel prepared and confident in their decisions when applying for loans,” Ms Foster said.

The workshop will also assess how to set realistic goals and whether buying land is necessary to get started in agriculture.

Farmers will also be guided through what they need to think about before approaching a bank, and what to expect when it comes to approval processes.

Agriculture Victoria’s Young Farmer Project co-ordinator Sarah Wallis said after working at NAB for more than a decade, Ms Foster knew the agribusiness sector inside out.

“Young farmers should register for this online workshop to learn and understand the financial lingo so they can talk to banks and other finance partners, plan their futures and make it happen,” Ms Wallis said.

The free Farm Finance — Getting Prepared workshop is supported by Agriculture Victoria’s Smarter, Safer Farms program.

It will be held on Friday, July 24 at 12.30 pm, and the session will be recorded and made available for those who register.

Registrations (via Zoom) can be made at: zoom.us/meeting/register/tJ0of-ytqjotGtbyo1ynhItVJXApFjOkJM3i

For more information, phone Sarah Wallis on 0419 571 208.

Here’s what different schools are doing:

• Harvard will allow up to 40 percent of undergraduates on campus this fall, with first-year students getting priority. All classes will be held online, regardless. The university will charge full tuition — currently set at about $50,000 — but some students studying remotely will receive a $5,000 stipend.

• Princeton won’t allow more than half of undergraduates on campus at any point. Some small classes might be held in person. The school will cut its tuition by 10 percent, to $48,500.

• Georgetown will invite first-year students on campus only. It hasn’t yet decided whether to cut tuition, currently set at $57,000.

Expect lots of coronavirus testing. Harvard will test students on campus every three days, while Cornell will test weekly. Georgetown says tests will be available whenever they are needed.

Plenty of questions remain:

• What are students getting for their (mostly full-price) education? “They are exposing the kids to increased virus risk, something that is arguably justifiable in exchange for in-person learning, which everyone agrees is better than online,” Ken Bradley, the father of a Yale student, told The Times. “But no, the kids will do remote learning, from campus! At full tuition!”

• Can institutions afford widespread testing? Big, rich universities have the money and resources to test students for the illness regularly. That is not the case for other institutions, including primary and secondary schools.

• What about older faculty members who are more at risk of contracting serious illness? Over 850 instructors at Georgia Tech signed a letter opposing the school’s reopening plans, which do not mandate face masks.

If you still have income coming in, don’t forget to put aside money for your future retirement needs.

“I wouldn’t overdo it right now. I think the key thing is to be slow and steady,” Sun said. “Think about ways you can consistently save.”

One way to do that is to increase your 401(k) contributions. Even small increases can add up big over time.

In addition, you may want to consider investing your post-tax money in a Roth individual retirement account. That way, you can withdraw your contributions if an emergency crops up without having to pay taxes or penalties, Sun said.

But beware: If you withdraw the earnings on your investments, you will face penalties.

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BALTIMORE, July 7, 2020 /PRNewswire/ — As many families navigate financial hardship and stress brought on by the pandemic, T. Rowe Price advises parents to discuss potential money challenges with kids during this difficult time. The firm’s research shows that kids are astute observers of family financial dynamics, often detecting when there is financial stress. In the absence of guidance from their parents, kids are left to form their own conclusions about the drivers of financial stress and what it means for their family.

The firm’s 2020 Parents, Kids Money Survey looked at the impact of financial stress on families prior to the pandemic. Among parents who had declared bankruptcy, kids who are aware of their parents’ bankruptcy are more likely to rate their own financial habits as excellent or very good compared with those who are unaware (84% versus 34%). The survey sampled 2,030 parents of 8- to 14-year-olds and their kids.

Parents facing unforeseen events such as furloughs, pay reductions, business closures, and falling asset values should consider discussing with their kids the impact on the family’s finances. This will help kids better understand changes to spending habits and future plans, including education.

T. Rowe Price’s 2018 Parents, Kids Money Survey found that money conversations with parents are associated with better financial habits in adulthood. Young adults who discussed money with their parents are:

• More likely to have a budget (88% versus 73%)
• More likely to have an emergency fund (60% versus 43%)
• More likely to put 10% or more of their income toward savings (66% versus 48%)
• More likely to have a retirement account (56% versus 36%)

To help parents discuss money with their children, T. Rowe Price created the Money Confident Kids^®  program, which teaches families to have conversations around planning for the long term by focusing on financial concepts such as goal-setting, inflation, asset allocation, and investment diversification.

The economic fallout of the coronavirus makes money conversations more important than ever

Regardless of whether parents are under financial stress, the novel coronavirus offers an opportunity for parents to broach financial subjects with kids such as the importance of emergency funds, manageable levels of debt, the concept of financial flexibility, and how to keep fixed expenses down. The current situation helps kids put “what if” events into context and can make abstract money concepts understandable.

Kids are watching parents and how they manage money

More than 90% of kids perceive their parents’ financial habits as good, very good, or excellent, and 62% said the conversations they have with their parents about finances makes a difference, according to T. Rowe Price’s 2020 Parents, Kids Money Survey. Whether kids’ perceptions about how well the family is doing financially are accurate, kids appreciate financial honesty.

Parents don’t have to be money experts to teach financial education

While parents’ confidence about talking to their kids about money management is low—only about 26% of parents felt they were extremely knowledgeable about managing expenses—data from T. Rowe Price’s 2020 Parents Kids Money Survey show that parents don’t have to be money experts in order to teach their kids financial education. About 41% of parents are reluctant to discuss financial matters with their kids, but kids still see parents as their primary teacher of good financial planning. According to last year’s survey, more than half of kids said they wish their parents taught them more about money.

QUOTE
Roger Young, vice president and senior financial planner, T. Rowe Price
“While many families are grappling with financial unknowns, parents should remember that their kids may be picking up on unspoken cues about money and the family’s situation. We know that many parents are reluctant to discuss money matters with their kids. But we also know that kids are better positioned for financial responsibility if their parents do discuss money with them. It may be particularly difficult to have these conversations now amid the economic fallout of the coronavirus, but it’s more important than ever to be transparent with kids.”  

ABOUT T. ROWE PRICE
Founded in 1937, Baltimore-based T. Rowe Price Group, Inc. (NASDAQ-GS: TROW), is a global investment management organization with $1.19 trillion in assets under management as of May 31, 2020. The organization provides a broad array of mutual funds, subadvisory services, and separate account management for individual and institutional investors, retirement plans, and financial intermediaries. The company also offers a variety of sophisticated investment planning and guidance tools. T. Rowe Price’s disciplined, risk-aware investment approach focuses on diversification, style consistency, and fundamental research. For more information, visit troweprice.com.

SOURCE T. Rowe Price Group, Inc.

Related Links

www.troweprice.com

You did it. You officially graduated into the real world.

With this newfound freedom comes new responsibilities like paying bills, building savings, contributing to retirement, paying down debt and much more. But before you get overwhelmed, take a deep breath. The first step to tackling your post-grad finances is coming to terms with them.

Here are six tips for starting your adult life on the right foot.

1. Create a budget

First things first, figure out a realistic budget for yourself.

Most recent grads aren’t swimming in money, and many are facing a tough job market because of the pandemic, making now an even more critical time to create a budget.

“Now is the time to take stock, prioritize which expenses are essential and look for ways to build a cushion and (look for) potential investments for the future,” says Linda Greenfield, a career coach at Essential Career Counseling in Los Angeles.

Greenfield recommends that recent grads take a course in personal finance before starting their career.

A popular budgeting method that’s known for its straightforward approach is the  50/30/20 budget rule. The method suggests dividing your post-tax income into three categories: needs, wants and savings.

• 50 percent of your take-home pay should go to essential needs like health insurance, housing, transportation and groceries.
• 30 percent should cover wants (or non-necessities), such as streaming-service subscriptions, concert tickets, dinners out or vacations.
• 20 percent should be set aside for savings and investments.

You can keep yourself accountable and on track with a budgeting app, like Mint or You Need a Budget (YNAB). These digital tools offer real-time alerts and track your spending and savings when you connect your banking accounts.

2. Pay yourself first

When first starting out, you likely won’t have a ton of money leftover with a majority of your income going toward living expenses (especially if you’re planning to move to a big city) and other necessities.

But remember that you should always pay yourself first. That means setting aside a portion of your monthly income, ideally 20 percent, in savings.

Taking this step will help you build your emergency fund, so if you happen to fall on hard times, you’ll have a safety net to catch you. Now, in a pandemic, the importance of emergency savings has been highlighted for millions: 23 percent of Americans say their biggest financial regret was not having saved enough, according to a recent Bankrate survey.

“Successful saving is all about the habit,” says Greg McBride, CFA, Bankrate chief financial analyst. “The best way to establish that habit is to automate the savings, such as with a direct deposit from your paycheck into a savings account and 401(k) contributions made by payroll deduction. The savings are done before you even roll out of bed on payday morning.”

If you’re just getting started, apps like Digit and Dobot can also help ease you into the habit of saving. The hope is that by automating your savings, you won’t even notice the missing money as you’ve already accounted for it in your budget.

3. Build your credit

Your 20s are a critical time to build your credit.

Your credit score is a metric that lenders use to help determine your creditworthiness and ultimately determines things like what apartments you’re eligible for and what interest rates you qualify for.

One of the most important things to remember about building your credit is that it’s vital to pay your bills on time and in full every month. If this isn’t something that you can commit to, then hold off getting a credit card until you’re in a more secure financial position.

When it comes to applying for a credit card, do some research ahead of time. It’s important to find a credit card that fits your spending habits and one that you qualify for given a lack of credit history.

It’s important that you don’t go applying for credit cards left and right, as that will only hurt your chances of being approved. A good place to start is by using CreditCards.com’s CardMatch tool to see what you may prequalify for. You may have a harder time getting approved for a credit card during the coronavirus crisis.

“It’s definitely harder now, but not impossible,” says Ted Rossman, industry analyst at CreditCards.com. “I’d suggest student cards and secured cards as good ways to get started. They’re not as selective about credit quality, and using them responsibly will boost your credit score. There’s also a growing class of startups targeting young adults, like the Petal Card and TomoCredit. They go beyond the traditional credit score and practice cash flow underwriting (taking a detailed look at your income and expenses). Apple Card is also widely available and is unique because you can find out if you’ve been approved or denied with only a soft credit inquiry. All of these are good starter cards.”

If you’re not quite ready for a credit card, Rossman suggests giving Experian Boost a try. This is a great tool for those who have a limited credit history but have a track record of on-time bill payments, as the service uses that information to boost your FICO score.

Another way to build credit is by asking your parents to add you as an authorized user on their credit card.

4.  Learn how to maximize your spend

Managing a budget and building your savings are both very important and the first order of business when it comes to reaching your financial goals. However, there are also other ways you can stretch your dollar, like learning how to maximize your money whether it be from shopping portals or credit cards — it’s just a matter of knowing how.

The Points Guy, a sister site to Bankrate, is dedicated to teaching you just that. Some of the top, high-spend areas where you may be missing out on points, discounts or cash are:

• Online shopping.
• Dining rewards programs.
• Credit card points and cash back.

By adopting these strategic spending strategies, you can avoid leaving any money on the table.

5. Refinance your student loans

If you have student loans to pay back, consider refinancing them. This could be a smart move if you have multiple loans with varying interest rates. Ideally, refinancing would help you get out of debt sooner and possibly reduce your monthly payment obligations.

When deciding whether to refinance, check to make sure that refinancing will actually save you money. Be careful about refinancing federal student loans as doing so might make you ineligible for benefits, like income-driven repayment options, federal student loan forgiveness programs and coronavirus payment relief via the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Currently, federal student loan payments have been suspended until Sept. 30 thanks to the CARES Act. Unfortunately, this does not apply to private student loans. If you’re in the position to continue making payments, you could decrease the life of the loan substantially since these loans are no longer accruing interest.

6. Start investing

You don’t have to be the wolf of wall street to start investing. In fact, it’s a lot easier to get started than you might think.

One of the easiest ways to start investing is by contributing to a 401(k) fund, especially if your employer offers a match. These funds are automatically deducted from your paycheck. Given its tax advantages and potential matching opportunities, this is a great first investment opportunity.

Another good option is investing in an SP Index 500 fund. This is something the legendary investor Warren Buffet has advised investors on for years as it returns an average of 10 percent annually for investors who buy and hold it.

For those unfamiliar with this type of investment, an index fund merely mimics the stocks in the fund, rather than trying to pick which stocks will do well. So an index fund is a classic type of passively managed investment, and only adjusts its holdings when the underlying index changes, says James Royal, Bankrate’s senior investing and wealth management reporter.

Those are just two of the easiest and least risky investments to get into, but of course, there are plenty of other options to help you start investing.

Bottom line

The earlier you learn how to responsibly manage your money, the better off you’ll be in the future. Life gets busy and surprises happen, so you’ll thank yourself later when you’re prepared for the unexpected.

It’s important to be prepared for emergencies, and responsible money management also grants you the ability to indulge in more fun things like vacation, dinner with friends and a little something special for yourself every now and then.

Featured photo by Nay Ni Ratn Mak Can Thuk / EyeEm of Getty Images.

Learn more:

• 7 tips for finding a new job in a post-pandemic world 
• How to consolidate student loans 
• What to do once your coronavirus unemployment benefits run out 

Longevity means living a long life, but it also increases the chance of running out of adequate resources, according to a report recently published by the Society of Actuaries (SOA).

Retirement planning requires having assets and a flow of income to last through retirement, according to the report.

In an interview, Anna Rappaport, a co-author of the report and a member of the SOA’s Committee on Post-Retirement Needs and Risks, discussed the risk of longevity and the ways to manage it.

“The risk means living a long life and, and basically not having enough money to pay for that long life,” said Rappaport. “Retirement planning requires having assets that will last to the longest of, in a couple, the second person to die.”

The unforeseen disruption of the novel coronavirus outbreak has forced businesses to reevaluate their strategies to continue their core operations and recover the loss. Meanwhile, it has struck fear and anxiety in people.

There’s no concrete prediction as to when this pandemic will ease off. Because of this, many are worried and asking themselves if there’s any way to secure their finances, build up their funds, and prioritize their expenses in the middle of a crisis, when several industries are seeing instability.

In times of uncertainty towards job security and financial unrest, you must take practical steps to manage your finances and avoid financial problems to survive through this global health crisis.

Build and prioritize your emergency fund

The pandemic has affected economies, businesses, and livelihoods. Thus, your top priority in a financial crisis should be building up your emergency fund. A lot of businesses are closing up due to loss, and many people are let go from their jobs. If you’re worried that you might lose your job as well, the last thing you should do is invest more of your money.

For now, save at least six months’ worth of emergency fund, enough to cover your day-to-day living expenses. If you can set aside more, do so. Consider taking side hustles and try figuring out ways to cut down expenses to build a bigger emergency cushion. In difficult times like this, you should prepare yourself for the unexpected.

Continue allocating funds for your savings

While it’s essential to build a sizable emergency fund, you must not stop setting aside for your savings. Keep any amount you have saved and, if possible, continue contributing to it to support your long-term needs.

If you received government financial assistance, allot a portion (or the entire amount) of that into your savings instead of spending it on something less necessary. When you can cover shortcomings with your savings, you won’t need to spend your emergency fund or sell your investments.

Manage your debt and utility bills payment options

If you have pending debts to repay, put your extra money into these payments. If your budget is a little too tight and there’s nothing you can do to squeeze these in, call your bank or lender and ask if they can waive the interest rates and late fees for the time being.

The same goes for utility bills—much like how banks and creditors acknowledge the substantial impact of the pandemic on their customers, internet service providers and power distributors are likely to waive bills and offer staggered and flexible payment solutions. Make sure to be proactive and reach out to them to help you find the most practical option that fits your current financial situation.

Start an investment account

If you managed to build up a small amount allocated for investing before the pandemic started, consider investing in stock trading or any other investment options. Because of the pandemic, stock prices have dropped, and many investors are picking them up on a bargain.

If you’re happy with the amount in your emergency fund and can continuously contribute to your retirement fund, consider opening a personal brokerage account to put money in the market and build your wealth. When you invest, keep it in the market for as long as you can and gain higher profits when the market turns bullish again.

Get what you need within your budget

During a pandemic, it’s important to stock up on necessities. But, not a lot of people have a significant amount of money to get everything they need, and this is where shopping and stocking up smarter come in.

When it comes to groceries, reach out for shelf-stable foods, fresh foods that freeze well, and long-lasting products in case you get stuck at home longer than expected. For medications, pick up some extra supply of your prescription medication, along with some cold and cough medicine.

Before you head out to stock up, do an inventory of what you already have at home, so you won’t make the mistake of buying more of the same things and spending more than you have to.

Trim your spending and track your expenses

Keeping a budget and sticking to it is the key to help you take better control of your finances and give you peace of mind during difficult times. Take time to sit down and look closely at your finances to help you spot opportunities to save money and trim your spending.

For instance, consider cutting off one of your streaming services and unsubscribe from your gym membership. Do also look for monthly bills you could reduce, such as your phone plan and cable TV. As much as possible, refrain from getting food delivered and cook your own food.

Wrapping it up

Focusing and monitoring your budget and expenses is the best way to keep your finances in order right now. Whenever you feel the urge to shop online when life gets a little too stressful, do your best to curtail it.

Remember that while this is all temporary, you need to get a stable footing and prepare yourself for more financial hits. When everything settles down, you’ll thank yourself and call all your efforts worth it for managing to build funds for your future.

The author of this article is Adrian Reid from Enlightened Stock Marketing
Image from https://www.pexels.com/

Image source: Getty Images.

As such, it’s imperative that you take steps to catch up on retirement savings if you’re currently behind, regardless of age. Here are a few ways to do just that.

1. Boost your income to allow for higher retirement plan contributions

If you’re an average wage-earner, you may have a hard time parting with a lot of money to put into your 401(k) or IRA. But if you’re willing to do a little work on the side, you’ll have a dedicated income stream you can use to fund your retirement savings. Think about a side gig you can take on that works for your schedule and lifestyle, and commit to doing it a few hours a week as a start, with the goal of working your way up. If you manage to earn $100 a week from that gig on average, you’ll have a chance to sock away over $5,000 a year for retirement.

2. Bank your raises every year

It’s natural to look at a raise and start making plans to spend that money. But if you instead earmark that extra income for retirement, you won’t actually miss it. Even if you don’t manage to part with additional money from your current earnings, if your salary goes up by $2,000 next year and you allocate all of it to your 401(k), that’ll still bring you closer to your savings goal.

3. Compensate with a strong investment strategy

To be clear, investing wisely should not, and cannot, take the place of consistently funding a retirement plan. Rather, you need to do both to increase your chances of ending your career with enough money to cover your expenses during your senior years. But if you’re unable to do much to ramp up your 401(k) or IRA contributions right now, you can, at the very least, invest that money in a manner that fuels its growth. If you’re seven years away from retirement or more, that means loading up on stocks, which typically offer much higher returns than bonds.