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5 steps for building financial resilience

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5 Steps for Building Financial Resilience

Al Waller: I’m Al Waller, your host of ClearPath – Your Roadmap to Health & Wealth.

Now, in our last episode, Mihaela and I discussed getting a fresh start on our 2022 fitness goals. To that point, starting a new year is also a great time to implement strategies to become more financially fit, don’t you think?

And as the pandemic persists, it continues to disrupt most economies globally. Here in the U.S., December data indicates that inflation jumped to the highest level in nearly 40 years. I mean, let that sink in for a moment…

So really, now more than ever would be a particularly opportune time to discuss the idea of becoming more financially fit in the new year.

Well, back with us – is Catherine Collinson, CEO and president of nonprofit Transamerica Institute® and she’s here to do just that. Now Catherine, in your mind, what should our listeners be placing their focus on as we head into a new year?

Catherine: Well, Al, first of all, it's great to be here and I don't know that I'm alone – I think it's great to be starting a new year. Looking forward to talking about how we can use New Year's, this milestone, as an opportunity to find ways we can strengthen our financial situation in 2022. And I'm here to share with you five strategies to accomplish that.

Al: Well that works for me, Catherine. So, could you get the ball rolling and walk us through the five strategies that you just referenced?

Catherine: Let's start with the first one, and that is – building financial strength is more than just building savings. If we step back and take a more holistic approach, building financial strength is also about assessing our overall goals, our overall life goals.

That's the first thing we should do as we set out to strengthen our financial situation. So, when we talk about goal setting, I'm not talking about dollars and cents, although that's very important and we will get to that – but it is an opportunity to step back and reflect what is really important to us in life. Who is really important to us in life? What brings us the most joy? And what do I want to accomplish in the new year? These questions are really helpful for financial goal setting because one, they are motivators and secondly, we want to align our finances with those goals, with our values.

So, stepping back to assess our personal goals is an important ingredient to assessing our financial goals. Then when we do get down to dollars and cents, asking ourselves what are the big things we are saving for over the course of the year? Over the next few years? Or even retirement? And do we have any big expenses coming up that we need factor?  

All these things can help us with our financial goals setting. I'll also make a plug for retirement savings. We are looking at short-term goals and long-term goals. The new year is also a great time to just look at are we on track for saving what we need to for that day when the time comes that we’ll no longer be working.

And we find that relatively few people – our research has found that only one in four have used a retirement calculator or used a worksheet to estimate how much they'll need to save. So as part of our life goal setting, our short-term financial goal setting, it's also important to think about our long-term retirement savings.

Al: Well, Catherine, I've got to say I fully endorse that line of thinking, especially taking stock of our goals and especially as they are liable to have to remain pretty fluid at this point. And let's face it, the pandemic has produced little if anything positive with the exception of prompting many of us to be more mindful of our life priorities. So, I can see how focusing on our life priorities can make those goals more meaningful and hopefully, more achievable. Now what's your second recommendation?

Catherine: The second essential to do is an essential part of doing your homework and this is just assessing your financial situation. Doing an overall review of your savings and investments, any debt you have, as well as your retirement savings. It's really important to know exactly where you stand.

And Al, the pandemic has been a tough time for a lot of people and something that I've seen over the years in research – sometimes when people are going through tough times, they just don't want to deal with it. If the stock market is down, they don't want to look at their 401k statements. But the reality is in good times or more difficult times it's really important to know where you stand because that's your starting point as you build a road map for the future.

Al: Agreed and in addition there may be resources available at your bank, credit union, or some other financial institutions. And if I can just back up a second to your previous point and really emphasize how critical it is that we all take a close look in ownership of our financial status to gauge how realistic those goals and aspirations truly are and if we need to, make sure we are making those adjustments and tweaking them accordingly, because at the end of the day wishing won't make it so and it certainly does not occur by osmosis either. Now, what's up on your next essential to-do list?

Catherine: This is a different type of investment. So, we've talked about savings and investments and retirement savings. This is about investing in yourself and in technical terms, your own human capital, your earning power, which is essentially your employability.

What do I mean by this? Our research finds that many people want to be able to work as long as they want and need – not only for financial reasons but for healthy aging reasons, staying active and involved and having a sense of purpose.

If weve’ learned anything during the pandemic, the world can change quickly. Employment markets change quickly. New technology is in. Old technology is out. And it's really important to keep our jobs skills up to date. So, as we are investing in ourselves, it’s taking time to ask ourselves where can we grow.

The new year is also a really good time to update your resume and your LinkedIn profile. I don't know if this is the case with many of our listeners. I know it is with myself and my friends. But it's this time of year that we are often asked to do our self-appraisals with our employers, those dreaded self-appraisals.

But it's a really important time to not only reflect on your accomplishments, to report that to your boss, but while you're doing it you might as well kill two birds with one stone, take all those accomplishments, make sure your resume is up to date, and your LinkedIn profile truly reflects who you are and your professional experience.

And, that process, again, can help us identify areas where we want to learn and grow or areas where we might be at risk of our job skills falling out of date so we can take action – either get training and other types of things to help keep them up to date and relative relevant.

Al: Catherine you’re spot on here. Resumes are another reminder of how time flies and things change. From my personal perspective, I know it's a heck of a lot harder to document your professional history and update your resume if you have let things ride three to five years say versus 12 months. And to your point, it's great for those professional assessments that you have to do with your company, but also if you're recruited externally by somebody, recruiters are going to want a current resume and you want to be able to put that together, so you don't miss out on an opportunity. All good reasons to stay on top of that and keep current with your resume and profile.

So, what else do you have for us?

Catherine: The fourth strategy is review your insurance protection. Did you have a baby? Did you get married? Did you buy a house? These types of major life events may make it necessary to add more life insurance coverage. So, assess the current levels of coverage that you have with your employer, if any. If you need additional coverage, consider working with an agent or an insurance company directly.

The new year is also a time to review our home and auto policies to ensure that coverage is adequate, and it may be time to get quotes from other insurance companies just to find out if the rates you are paying are competitive.

As we know, competition is fierce in both the home and auto industries. So, you may be able to lower your rates and increase your coverage. Also, looking for discounts for you and your family that you might be eligible for – things like good students, discounts for teen drivers.

Also, back to the passage of time because you kind of touched on how quickly time flies – a lot of people get their homeowners policy. It's good, but things change. It's just so important to look at that coverage and make sure it's in alignment with your current situation because home values change. Replacement values change, especially as we are experiencing supply chain issues right now. It's just a really good idea to do that sanity check. Hopefully, you'll never need to file a claim against that coverage and won't have any problems. In case you do, you want to make sure you are properly covered.

Al: Well Catherine this really resonates with me, and for those of us who get policies and file them away without thinking about them again, you make a good point here. Let's face it. It's easy to overlook doing a basic review. With life changes, that might necessitate changing your insurance to get better rates or to expand that coverage for cost or both or to borrow from that old insurance campaign. Life comes at you fast, so you better be prepared for that.

We're down to our last to do. So, tell us a little bit about that.

Catherine: This is another really important “to do” that most people, many many people have not taken on yet and it is just so important…one of those big things that we've learned during the pandemic. That is setting forth legal documents that outline your wishes and these types of legal documents can include a last will and testament, medical and financial powers of attorney or proxies, an advanced directive or living will, a trust, and a HIPPA waiver.

These documents are really important in the event that you are temporarily unable to make decisions on your own behalf or, worst case scenario – which we won't talk about – but if something does happen to you, that your wishes are documented and that you have a legal representative to ensure that they're acted upon. To give you an idea, I just reeled off a number of different types of documents.

Our most recent retirement survey finds that almost half of workers do not have any of these documents in place. So, you may not be ready for a trust, but things like a HIPPA waiver or something that's really important for everyone – and again also things like medical power of attorneys, financial power of attorneys and having a will.

I like to think of it as carrying an umbrella in case it rains. Chances are you are not going to need these documents for a long time and hopefully, hopefully…but at some time you will…and hopefully that comes later than it does sooner, but it's a lot easier to put these documents in place in good times then to be trying to react to a crisis situation as it comes up.

A lot of people may not know where to begin because it sounds kind of like a big scary task. Here's something kind of interesting. Some employers are now offering these types of legal services as part of their voluntary benefits. So, when benefits enrollment season comes, check if your employer offers these benefits. If they do, often they're at a low cost.

There are also some free and low-cost resources online to help set up basic documents, but you've got to make sure do your homework. Make sure you're working with a reputable organization. Also, the American Bar Association has tips on creating a will at americanbar.org. And depending on your situation you may want to consult an attorney.

Al: Exactly, Catherine, and thanks for the reminder because giving away personal information online is how people become victims of fraud, and just to point out, a good and reputable source for completing advanced directives would be hospitals and doctors, many of which provide their patients with forms to complete and then keep on file for them.

As a matter of fact, my family care physician has been proactive in requesting these documents to maintain a timely update on file – I really appreciate that kind of diligence on my behalf. But I get the fact that nobody really likes to think about needing these documents. I mean, who wants to think about the end and these types of inevitabilities. It's way too easy to procrastinate setting them up.

That said, I've found knocking out paperwork like this when things are going well is far better than, as you mentioned, the prospect trying to complete documents in the midst of and in the stress of an emergency event or crisis.

Well, Catherine once again thank you for sharing these essential five to do's and helping us get in shape for a financially fit 2022.

ClearPath – Your Roadmap to Health & Wealth is brought to you by Transamerica Institute, a nonprofit private foundation dedicated to identifying, researching, and educating the public about retirement security and the intersections of health and financial well-being. You can find our weekly podcast on WYPR’s Podcast Central and mobile app, wherever you get your podcasts, and at transamericainstitute.org.

Until the next time I'm your host Al Waller wishing all of you a happy, safe, and very healthy New Year. Thanks for listening.

Clearpath is produced by the Transamerica Institute with assistance from WYPR.

Al Waller is a long-time Baltimore native and employment expert with a 30-year career in leading and advising locally and globally based corporations on matters including: Talent Acquisition and Retention, Employee Relations, Training and Development.
Catherine Collinson is the founding president and CEO of nonprofit Transamerica Institute and its Transamerica Center for Retirement Studies, and she is a champion for Americans who are at risk of not achieving a financially secure retirement. With two decades of retirement industry-related experience, Catherine is a nationally recognized voice on workforce, aging, and retirement trends. She was named a 2018 Influencer in Aging by PBS’ Next Avenue. In 2016, she was honored with a Hero Award from Women’s Institute for a Secure Retirement (WISER) for her tireless efforts in helping improve retirement security among women.