Wednesday, September 23, 2020
Coming out of Covid: 11 Key Takeaways
As we enter the final quarter of 2020, we can look back at the last 6 months for guidance on how to handle what is to come. One positive is that we are armed with far more knowledge now than we were in late March, early April. This winter is sure to be the wildest, weirdest of my lifetime and I am certain yours as well. That being said, the Covid-19 Pandemic did bring us some positives. When we take a step back, we can reflect on what we have learned thus far. I want to take some time to explain some Key Takeaways from the Covid-19 Pandemic to prepare us for the coming second wave, or if you are in America, the continued first wave. Let’s get started.
Most of the people I know, even those who lost jobs to the outbreak and were on government subsidy, were saving money. Do we not find it odd that many people, even those who took a pay cut, were saving money? How can we make less money and yet have more money? I think we know the answer. During the height of fear in late March through early May, there was very little you could spend your money on. After putting on your hazmat suit to go to the grocery store and picking up a bottle of wine on the way back home, boarded-up stores was the scene. Is this good for the economy as a whole? No, clearly not. That does not discount the fact that our economy is largely based on you spending your money on crap you clearly do not need. This past summer as things began to reopen, did you maintain those Covid cutbacks? As we enter winter and outbreaks begin to flourish, maybe it is time to revisit our March mentality of not spending money we do not have on things we do not need. Groundbreaking, I know…
Cook at home
If you spend any time on Instagram, which I sadly do, you will know that it consists of 3 main themes. Beautiful people (namely women), cute animals (namely dogs), and delicious food (namely dining out). I’d say 75% of IG is 1 of those 3 types of posts. With restaurants closed, the food side of things was lacking. But wait, fear not loyal IG addicts. Making your own food was all of a sudden the rage again! Suddenly everyone was a master chef, cooking from home 6 meals a day because we have nothing else to do. Going back to point #1, as we began to eat at home more, our wallets became a bit heavier, along with our bodies in general. Don’t get me wrong, I am a fan of going out, but not at the expense of my monthly budget. I think it is important to make the majority if not all of your meals at home. I rarely eat out and the reason is quite simple: I find very few meals on the outside that I cannot make better without a huge markup to boot. I fully endorse cooking at home. It is fun and affordable. Let’s get back to that.
Do you really need that?
I love local businesses. Oddly, I also love Amazon. I believe in the right blend of supporting local along with the convenience of a service like Amazon. I find it quite amusing when people knock Jeff Bezos or other uber-rich folks, and yet they only became uber-rich because the majority of people use and love their products or services. I think we are asking the wrong questions here. The right question is this: Do you really need that? I try my best to put off purchases. In fact, I put them off so long that I often forget what I was going to buy in the first place. I would recommend waiting 24 hours before buying anything that isn’t essential, ie. food, household goods. The proliferation of home delivery services during the peak of the pandemic was quite disturbing. During the height of the Pandemic, the only cars that were on the road were UPS trucks. I personally only order online when I absolutely need something. Do not trade your boredom for an online shopping addiction.
Job security is EVERYTHING
Read that again. Yes folks, if there is one thing we truly learned because of Covid-19, is that having a job is indeed a blessing. Unemployment in April and May hit record levels, not seen since the Great Depression. Luckily, the majority of those jobs have come back. For those who have not gotten their job back, and even for those who have, I want you to understand a key point. If your job was so insecure that closing for a month or three made it go away, then you need to reevaluate your employment. This sounds harsh, but it’s true. Jobs were lost for one simple reason, profits were down, or non-existent, due to closures. Any number of things can cause this. For 2020, the reason was obvious. The next reason may not be as obvious. You need to get yourself to a position where corporate margins do not determine your financial success. How you do this is by staying relevant, always. Sadly, the majority of jobs lost were to those at the lower level of employment, restaurants, retail, etc. We need to understand that these positions are precarious at best and quite frankly, the people that work them are extremely replaceable at any time. I know this firsthand. I worked in the restaurant industry for 15 years. There is nothing wrong with working in these industries, as long as you know your role is not secure. Use these jobs as a stepping stone to something more secure. Upgrade your skills, pick up a side-hustle that may become the main hustle one day, learn something new. Don’t let the next event set you back another year or decade.
Emergency Funds are Vital
Another key personal finance element exposed by the pandemic is that having a fully stocked emergency fund will help you weather storms. During the height of the Pandemic from March to June, I was bringing in very little income. Luckily, I was not spending much either, but even more lucky was the fact that I have a fully stocked Emergency Fund. Experts say you should have 3 to 6 months expenses saved. I would say you need a year. The key is to start small and this is why I love the Dave Ramsey 7 BabySteps Method. When you are dead broke, or even worse in a lot of debt, having a thousand dollars saved seems like a million dollars. Getting to that threshold will propel you to save more until you get to the magic 3-month mark. Once there, keep pushing until growing that slush fund becomes like a game to you. Those with fully stocked EF’s make it through financial storms, like a job loss or even worse, becoming seriously sick. Again, it seems so simple, yet most people in our society are living paycheck to paycheck. The level of mortgage deferrals in March and April should illustrate this fact quite clearly. We do not have enough emergency savings so make it your goal to change this. TODAY!
Health Equals Wealth
While Covid-19 was/is not any normal flu, it certainly affected everyone a little differently. It seems to go after those most vulnerable, namely the elderly and those with underlying health conditions. While we do not fully know the long-term ramifications of contracting the virus, we do know that many were not adversely ill in the short term. One thing we do know is that healthy people seemed to fend off the virus much easier which in itself is even more of a reason to be healthy. Health impacts us all. When you are healthy you have a million wishes. When you are unhealthy you only have one. I know this firsthand as I have experienced the pain of a debilitating chronic condition for more than half of my life. Striving the be as healthy as possible will lead to the pursuit of other noble goals such as creating personal wealth and leaving a lasting legacy. Without good health, these are all just dreams. Along with good health is the need to protect that good health with insurance. Adequate life, disability, and health insurance will protect your family should you get sick, hurt, or even worse, die. Protecting your paycheck is far more valuable than protecting your phone with Apple Care.
The markets are noise
This past May I celebrated my 4th full year as a financial advisor, which in my industry is no easy feat. What that also means is that I have known nothing but bull markets throughout my tenure. The pandemic put a sharp end to that. In March we saw the fastest, most drastic market decline in the history of the stock market. Most markets saw a steep 30-40% decline in around 3 weeks! This was enough to drive most people off the edge. I was busy guiding my clients through the storm with the hopes that we would be back to even by the end of 2020. To my surprise, and everyone else for that matter, markets bounced back to pre-pandemic levels by July. Since then new fears have arisen including massive sovereign debt, large unemployment, and of course the dreaded 2nd wave of the virus. What I have noticed is that the correlation between our economy and the markets have become ever more distant during this period. What does this mean to you? Nothing. Literally nothing. Every day I follow the markets, scope out trends, tie the loose end together, and every day it is just more and more noise. When life hands you noise, turn down the volume. Your portfolio should be based on fundamentals such as tax-efficiency, diversification, and a long-term outlook. The day to day, month to month and even year to year do not matter. Much like political news, market news is meant to grab headlines. Your wealth does not come from headlines. It comes from your hard work and dedication to your financial plan. Period.
Our leaders are noise
Tying into the last point, politics has become completely ridiculous. Correction. It always was ridiculous; it is just even more ridiculous now. While some leaders have handled the virus much better than others, almost all were caught flat-footed. Given that the last pandemic was over 100 years ago, I guess they have an excuse, but still. My key takeaway with our leaders is this: If you are looking for salvation or a better life to come from your leaders, you have missed the boat. In fact, you not only missed the boat, but you also aren’t ever going to get off the dock. Our leaders have one job and one job only. Sadly that job is to get elected and once elected, get elected again. What this means to you is that they will do things and say things to achieve this goal. What this also means to you is that your success is yours and blaming politicians for the lack of it is foolhardy. Politics has become a constant reality TV show, so don’t get wrapped up in it. Don’t let it hit your soul. It is quite literally a bunch of noise. That does not mean don’t vote. I firmly believe in voting. What it means is that vote for the platform that aspires to the greater good and frankly the party that will screw you the least. Don’t take it to heart when a politician lets you down because they always will. Focus on yourself, your loved ones, and achieving your goals. The rest will take care of itself.
What is really important to you?
I wrote a post about this a couple of years back, but in light of Covid-19 it rings far more truth than ever before. What is really important to you, and most importantly, do your financial choices reflect this? When asked this question most people will give the same standard answers. My family, my friends, my cute doggy, my future, etc. If these things are all important to you it is time to start making your financial choices reflect this. If your family is important to you, your job security should be of utmost importance to you because that is how you provide for them. The same goes for your future, as a secure job will help you achieve your future goals. Furthermore, if your family is important to you, then paying off your home so they will always have a safe place to live should be a top priority. This goes along with being debt-free as debt is a huge threat to your family’s well-being. Along those lines, life and disability insurance should be no-brainers as without those your family could quite literally be out on the streets. If your future is important to you then saving and investing money should be as well because without that a retirement of Kraft Dinner and hotdogs is certain. Although delicious, having it for dinner every night would be rough. You see my point is simple: You must make financial choices that reflect what you claim is important to you. If you do not you are simply paying lip service to what you think should be said. That my friends, is the dreaded thing none of us want to be, a hypocrite.
Stop complaining…no one cares
As the post continues with a darker tone, I will delve into another scary symptom of Covid-19. Chest pain, cough, nausea, fever, headache. Nope. A strong wave of complaining has swept the nation and it is getting worse by the minute. I am a history buff and my favorite period of history is World War 2. It seemed like the last time in our history that we had a legit case of good versus evil. As a society, everyone was asked to do their part. In England, people slept in the subways only to wake up and go to work the next day amidst the rubble of downtown London. In Canada and America, people were asked to buy war bonds and collect scrap metal and ration food for the troops and even worse, give their lives for the fight against tyranny. They all seemed to do it with a can-do attitude. Fast track to 2020 during our “war” we are being asked to wear a mask and not throw house parties. Let’s get real here. Life is not that bad. We have an abundance of food and water. We have technology that literally brings it to our doorsteps. We can see our friends through our phones and work from home. There are people who have lost loved ones and could not say goodbye. There are people locked up in old age homes away from the people that love them most. There are whole families being wiped out from this nasty virus. Your lack of social life pales in comparison to what is really going on out there. Take some time to focus on what really matters and for the love of God, stop complaining.
Covid-19 didn’t create weakness, it exposed it
Let’s face it. The Covid-19 Pandemic exposed a lot of weak points in our society. It obviously exposed the importance of health care and pandemic preparedness. We were caught completely off guard for the first wave of the virus. Our health care system was teetering on the edge before Covid hit and the fear of overwhelmed hospitals was a dire one. It also exposed the weakness of our economy, which is heavily reliant on consumer spending. Without the ability of people to get out and spend, millions lost their livelihoods and that is troubling. Furthermore, it exposed the weakness of our individual households. It showed that far too many people were ill-prepared to deal with a financial emergency. Far too many do not have adequate savings, are far too deep in debt, work at jobs with no security, do not have adequate insurance coverage, do not have any clue what their investments are doing, and do not have enough toilet paper to last the week. We need to take some time to correct these issues. This is not a government issue. Your boss can’t help you and neither can Gofundme. This is something you need to do right now before the next issue comes that will knock us off our feet. Oh yes, there will be something else. It could be a job loss, natural disaster, health concerns, or even death. The one certainty that came from Covid-19 is that we now know there is no certainty. Think back to the good old days of February where we could go to a concert, hug our grandmas, or shake a hand without being afraid. Life throws curveballs and 2020 has been a nasty one thrown by Clayton Kershaw. While we can’t count on everyone to be ready for the next nasty event, we can make our households ready for anything that comes our way.
Stay Strong, Stay Healthy, Wash Your Hands, Wear a Mask.
Rest in Peace Ruth Bader Ginsberg
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