Following a terrible past 15 months, it is good news that the U.S. economy is now moving into a more solid and, we believe, sustainable recovery phase.
The development of several effective vaccines within 7-8 months after the COVID outbreak is nothing short of miraculous and a true testament to the power of advanced medical technologies. Economic data in the U.S. continues to be strong: employment is recovering nicely, the services sectors and consumer spending are strengthening, and U.S. manufacturing is seeing a strong revival which should be further supported by proposed government infrastructure spending.
Short of an emergence of a serious new virus variant, we believe the recovery in the economy should be sustainable.
This is all good news, but there is still a COVID “aftermath” for many people that tells us that COVID’s lingering impact is far from over. There are still millions of people who remain either unemployed or underemployed due to the COVID recession.
For many people, this has impacted their finances and life goals. Savings goals for things like retirement or educating children have had to be put on hold or in some cases, wiped out, as savings had to be depleted to meet living expenses. With an improving economy, the employment outlook should hopefully look better for many of these people, but many may have to make major adjustments in terms of type of work, life goals, and financial goals, particularly retirement savings.
For people recovering from a financial storm induced by the COVID recession, we believe now may be an excellent time to take an updated, realistic assessment of their financial roadmap. Areas we believe that are of particular importance now would be a realistic income assessment, careful budgeting and expense re-calibration, and carefully assessing investment resources to best position those assets to meet long-term financial goals.
A comprehensive financial plan will take all of these elements into account, and not only income and expenses but also assets, asset returns, liabilities, and financial goals, all of which are integrated in a way that produces a much more powerful outcome with higher predictive value.
While millions of people are still greatly impacted by financial setbacks of the COVID recession, there is light at the end of the tunnel. A realistic assessment of one’s finances and financial outlook supported by a competent financial plan can go a long way to reaching that light portal faster and with greater confidence. As financial planners, we see the value of comprehensive planning every day.
At the end of the day, it is confidence and peace of mind that we are all seeking. While financial goals may need to be altered due to the impact of the COVID recession, we can take comfort that there are avenues for help and support that can provide a better defined financial roadmap with which to move forward more confidently.
Robert Toomey, CFA/CFP, is Vice President of Research for S. R. Schill & Associates on Mercer Island.