If you have managed to end up with extra money during the pandemic, here is how to take advantage of those savings.
1. Start an emergency fund. Establishing an emergency fund is one of the best things you can do for your future self, and if you put it in a high-yield online savings account, it will benefit from a higher interest rate than a regular savings account. You don't want to invest your fund because your primary goal for that money is accessibility, not growth.
2. Invest for retirement. If you haven't started investing, there are two easy jumping-off points: your employer's 401(k), if it offers one, and an IRA. Both are accounts that can help you invest for retirement with some tax benefits. Roth IRAs, for instance, allow your money to grow and be taken out in retirement tax-free.
Even if you are already contributing to a 401(k) or an IRA, you may want to increase that contribution. And because you can always change how much you are contributing, you can decrease the amount you are putting toward retirement if and when your spending habits return to normal.
3. Save for other goals. Retirement is a common goal, but it likely isn't the only one you have. Consider putting extra funds toward other things: college for your kids, a new car or a dream vacation.
Investing can help you achieve those goals faster than just saving, but keep in mind that you generally don't want to invest money you will need within five years.
If you have found yourself in a position of privilege during this global pandemic and have been able to save some extra money, you may also want to consider increasing your charitable contributions
4. Explore real estate investments. You don't have to start renovating an old barn or putting up shiplap. One of the easiest ways to invest in real estate is to invest in real estate investment trusts. REITs are companies that own (and sometimes operate) real estate that generates income, such as apartment buildings. Publicly traded REITs are bought and sold on exchanges, just like stocks, and have similar liquidity, meaning you can sell them with relative ease.
5. Get some help. Online financial advisers and robo-advisers have brought the cost of investment management and financial planning down significantly, and both are good options for when you're feeling lost.
These advisers can also help you stay hands-off with your portfolio during turbulent times in the market by ensuring that your investments are aligned with your risk tolerance. If you need a more comprehensive plan, consider a financial adviser.
