September 13, 2021

Practical Steps For Financial Resilience In Certain Times

A version of this article originally appeared on MarketWatch.

Taking in new information and adapting – it's something we often do without thinking, but the pandemic continues to test our ability to acclimate. Employers and employees seemed set to return to the office. Now they are facing tough questions about what the fall will look like for office work. Will they return? Should they postpone further? The answers are evolving with emerging public health data, and our lifestyles are shifting too. 

Finances are at the center of the shift for workers. During the pandemic, people reflected on and redefined what was most important to them and their families. Our recent 401(k) Participant Survey found that workers aren't approaching saving and spending like they used to. Workers say they would like to save more in general, increase their 401(k) savings rate, invest more outside their 401(k), and pay off debt.*

It can be challenging to act on these aspirations, especially when plans are in flux for so many workers. Getting started is often the hardest part but prioritizing financial health can help us in periods of uncertainty. There are a few practical first steps that can start savers on a path to meet these goals.   

Save

Workers who want to save more in general and within their 401(k) can work toward these goals at the same time. While it might seem overwhelming at first, addressing these priorities simultaneously in small doses can be beneficial for your overall financial picture. If your employer matches 401(k) contributions, consider contributing at least enough to meet that threshold. Then, you can work towards getting the rest of your financial house in order. Whether it's a car breakdown or a broken bone, there are some events in life we can't predict. Building up an emergency savings fund can help you deal with costs that might arise unexpectedly without having to borrow. 

Pay Off Debt

Debt is a common roadblock on the way to a comfortable retirement that can leave savers feeling discouraged. You can keep debt from getting in the way of financial progress by sorting out the types of debt you carry and starting with the costliest. Focus on paying off the accounts with the highest interest, such as credit cards, first and work your way down your list from there. Do your best to meet the minimum payment each month to avoid penalties and accruing additional interest. The faster you shed debt, the faster you can prioritize savings goals. 

Invest

Workers became more engaged with their finances during the pandemic and are now eager to invest more outside of their 401(k). Schwab found that 15% of all U.S. stock market investors began investing in 2020.** Many people have also become more confident making their own investment decisions, with 40% of the 401(k) survey respondents saying they feel this way, up from 25% in 2019. If you are looking to do more on your own, you can check whether your 401(k) plan offers a self-directed brokerage account option that lets you invest in securities outside the plan's core investment offerings. The expanded menu of choices can provide an opportunity to personalize investments that align with your retirement savings goals and values. 

Navigating this new phase of the pandemic can seem daunting, but remember you don't have to go it alone. Many workplace retirement plans offer resources to help you address your overall financial picture and develop a plan that's right for you. By taking small financial steps, you can create a path to thrive in uncertainty.