Financial pressure is a part of life for most people, and now the COVID-19 pandemic has brought new financial pressure points or exacerbated existing ones for many individuals and families.

But to navigate those pressures and build a successful financial strategy, you must first identify where the pressures are coming from, says John Smallwood (www.johnlsmallwood.com), president of Smallwood Wealth Management and author of It’s Your Wealth – Keep It: The Definitive Guide to Growing, Protecting, Enjoying, and Passing On Your Wealth.

“Once you’ve identified financial pressures,” Smallwood says, “you can decide what steps you will take to mitigate or reduce that pressure now and in the future. But if you don’t take any steps, you may end up repeating the mistakes of the past and never reach your financial goals.

“Major lifetime events such as the pandemic and the financial crisis of 2007-2008 can result in big financial setbacks for people and their portfolios for years thereafter. But identifying financial pressure points allows you to capture unique dynamics and elements of your financial life and form the building blocks of a wealth plan.”

Smallwood says to identify specific financial pressures, focus on the following areas:

Family. “The key to a successful wealth plan is not just the numbers,” Smallwood says. “What matters is the family dynamics – spouse, ex-spouses, children, parents, siblings, and in-laws. And right now, changes within a home can be tremendous because of the virus.” There are business struggles and cash-flow issues. Meanwhile, children are at home more because schools are uncertain of when they will be in session. Smallwood says the ages, health, and financial situations of all the individual members of the family can have an impact on the overall finances.

Income. “The majority of people have less than $50,000 in the bank,” Smallwood says, “and they have more in qualified and nonqualified assets. Where most balance sheets fall down is by looking only at income. You also want to look at all of the liabilities and future liabilities, and how assets and interests will determine income and cover your obligations in the future.”

Taxes. Knowing the details of your taxes can lead to better planning around them and lessen that pressure point. “Most people do not know what they really pay in federal or state taxes,” Smallwood says. “If you look at the income and understand where the taxes are, you can begin to find strategies for reducing the amount of income that shows up on a tax return, but still get money back and grow the wealth.”

Savings. What percentage of income are you actually saving, and where is going? “If it’s going to a retirement plan, we want to know whether any available employer match is being maximized,” Smallwood says. “Is the savings being built up in life insurance cash values or annuities? But when it comes to saving, it’s all about the habit itself.”

Debt structure. Debt can include everything from credit cards to car loans, mortgages to student loans. “The key with debt is to look at how it is structured,” Smallwood says. “Is the cash flow optimal? Paying off debt is a form of savings, but if it’s done the wrong way, you won’t have enough liquidity.”

“It’s critical to view the whole financial picture and see where you are spending and saving money currently,” Smallwood says. “If you don’t know, you’re not going to get to where you want to go.”