As the United States gradually progresses toward the re-opening of society, many businesses are offering many perks to entice people back into the workforce. I spoke with Martina Jimenez Sperry, a Market Director – Wealth at J.P. Morgan Wealth Management based in Atlanta. We discussed the methods people should consider following as they re-evaluate their personal and corporate financial goals as the economy emerges from the pandemic. Sperry has over 25 years of financial services experience and was previously a financial advisor. She holds her FINRA Series 7, 24 and 66 securities registrations and is a graduate of The University of Georgia. Her responses are italicized.
Assuming that savings were exhausted due to COVID, what is the optimal amount of savings someone should have as they head back to the workforce?
It’s hard to be future-focused, especially if you’re paying back debt repayments and have limited savings, but it’s very important. I’d recommend to prioritize the debt repayment and build an emergency fund of 3-6 months of living expenses.
Many Georgians are returning to work, or starting new jobs as the pandemic improves in the US, and this is a great opportunity to think about replenishing savings and investing. Taking advantage of work benefits like employer-sponsored retirement plans, Individual Retirement Accounts (IRAs), and Health Savings Accounts (HSAs) is critical. If your employer offers a company-sponsored retirement plan, like a 401(k), consider signing up or resuming your contributions. If the new company matches employee contributions, consider maximizing your contributions up to the highest percentage match to take advantage of all the matching dollars, if you’re eligible. And if you can increase your contribution rate automatically each year, that may help you keep up with your retirement savings goal. It can be easier to save more for retirement when you schedule contributions to occur automatically.
What would be the steps someone can take to rebuild their nest egg if the pandemic wiped them out?
In order to rebuild a nest egg, it’s important to step back and take inventory of your entire financial picture. Some key steps to consider including:
- Create a budget. This sounds simple, but many people don’t really know much money they’re making, how much money they’re saving and what their expenses are. Keep track of your transactions and understand the basics of your cash flow. Chase has a useful tool that I’ve found helpful, available online here.
- Look to reduce costs. Many people have found ways to reduce costs over the past year whether that’s eating out less or refinancing their mortgage. Consider reducing unnecessary expenses once you see where you are spending your income after creating a budget.
- Pay down debt. For many, erasing their debt won’t happen overnight, but it’s important to develop a plan and stick to it. Approaches include: making payments more frequently (biweekly instead of monthly, for example), and paying off the debt with the highest interest rate first.
- Keep saving. While it can seem daunting when faced with repairing finances, even a little money saved can go a long way over time. Even if the dollar amount you’re saving initially is small, keep at it. It will become a meaningful amount before you know it.
- If you can, invest. You don’t need to be rich to invest – this can be a common misconception. You do need to know how much money you can set aside for investing, even if just a small amount. Knowing your time horizon and risk tolerance is important, too. Today, there are multiple ways to invest from self-directed investing to roboadvisors for you. The entry costs for these platforms have also become significantly lower, so the barrier to getting started is low. There is risk in doing it yourself strategy. Make sure you get advice from a professional if you have never invested.
For the individuals who are now focused on seriously saving for retirement, what is the most important thing they must consider while putting their game plan together?
For many people, retirement is a major goal, and investing can be crucial to save enough for your future. If you work for a company that offers an employer-sponsored retirement plan, you should likely take advantage of it. Especially if there’s a company match – you don’t want to leave any money on the table that could’ve been yours. Make sure you’re contributing enough to receive the full match if your current situation allows. Having money taken directly out of your paycheck for retirement is a great way to easily invest without thinking about it. If you’ve recently switched jobs, make sure you understand any retirement plan offerings from your new employer, and think about whether rolling over the funds from prior retirement plans into your own IRA (individual Retirement Account).
The pandemic has shifted the nature of wants versus needs. In what ways can someone maintain financial discipline after receiving their first paycheck?
There’s nothing wrong about celebrating a return to the workforce, but it’s important to do it responsibly. One way to avoid an emotional, big splurge: know your financial goals. Know your budget numbers and stick to them. You may want to save for your children’s education or buy a house. Talk to a financial advisor and tax advisor about the smartest and most efficient ways to plan for the future to help you create a road map to achieve your goals.
This question is for the business owners: Between February and April of 2020, Black business ownership declined more than 40%, the largest drop across any ethnic group, according to a report by the House Committee on Small Business. As the world recovers and reopens, what would be the first step you’d advise these as they get their businesses back and strive toward financial security.
The J.P. Morgan Chase & Co. Institute found that one of the major challenges facing Black business owners was access to external financing. The study shows that that when the playing field is evened, Black-owned businesses with comparable revenues and cash reserves are just as likely to survive as White-owned businesses. (link)
To address this challenge, J.P. Morgan Chase has committed $350 million over the next five years to grow Black, Latinx, women-owned and other underserved small businesses. Seeking sources of low-cost, capital and technical expertise via organizations like the Entrepreneurs of Color Fund can help these business owners.