Perfect Recipe for Chaos: Coronavirus Crisis
We are living through unprecedented times. It’s unclear when we will be able to return to some semblance of normalcy, which has led to fear and outright panic. So, how do you financially plan through periods of absolute uncertainty?
The impact of the coronavirus continues to send shockwaves through the markets and is wreaking havoc on our day to day lives. What seemed almost unfathomable just weeks ago is slowly becoming a reality: complete shutdowns of our cities, restricted international travel, a run on goods, and shortages in medical necessities and services. Couple that with a likelihood of job losses, bankruptcies, and home foreclosures, and you have a perfect recipe for chaos.
If this pandemic has brought to light anything, it’s that negative, unforeseen circumstances can arise at any time, and it’s imperative to be proactive in having a plan in place for your finances. Note: It’s likely that since this writing, Congress will have approved the relief package, and we’ll know the specifics of how payments to US citizens will occur.
In times like this, having a budget is important. And so is sticking to it! Though many restaurants and shopping venues have either restricted traffic or closed altogether, online shopping and take-out are readily available. It’s admirable and important to support your local eateries and shops but resist the urge to order take-out every night. Stay home, cook, and enjoy time with your family around the dinner table.
Another order of business is to review your emergency fund. A general rule of thumb is to set aside at least 3-6 months’ worth of expenses in an interest-bearing savings account. In times where the prospect of a layoff or outright job loss is a possibility, having money set aside to get you through is imperative. If you’re fortunate enough to still have employment, make sure your emergency reserves are adequate in case the unexpected occurs.
If you find yourself in a position where your reserves are insufficient, and you are saddled with the loss of income, look for payment relief opportunities. Bank of America, for example, announced they are allowing mortgage holders the ability to defer payments due to financial hardships. Though the deferred payments will be added to the end of the loan, it affords a borrower temporary relief until they are in a better financial position.
Another item of note is that Indiana Governor Eric Holcomb recently signed an executive order that blocks evictions and foreclosures. Though this does not relieve borrowers or tenants of their obligation to pay, they are assured they’ll have a place to stay until the state of emergency is lifted.
Lastly, look for inexpensive, short-term options. Consider opening a credit card with an introductory offer of 0% interest for your mandatory living expenses. Be disciplined in this approach and use only when needed. Only go this route if you can pay the card off before the introductory period expires.
The Next Steps
If you are in a financial position to do so, consider reevaluating your current retirement savings. With the pullback in the markets, now is an excellent time to reassess your IRA and 401k contributions. If you aren’t contributing up to the maximum IRS limits, consider increasing your contributions to take advantage of potential buying opportunities.
While it may seem contrarian to what’s occurring in the markets now, remember, uncertainty and fear are powerful emotions and often become the driving forces behind market drops such as what we are currently experiencing. If you’re taking a long-term approach to investing, buying opportunities should be ample as the outlook for many companies will remain unchanged by what has, or will occur, during this time of crisis.
Times of uncertainty tend to remove rationality from our decision-making process, especially if we aren’t prepared. Though the current economic situation is still quite fluid, keeping a sound mind in how we approach each day can help alleviate some immediate concerns.
Consider all of the resources at your disposal and reach out to your financial advisor if you aren’t sure where to start with getting your financial house in order. Through proper planning and sound, disciplined strategies, we can all get through this crisis together.
Mathew Ryan, is a Financial Planning Specialist with Bedel Financial Consulting Inc., a wealth management firm located in Indianapolis. For more information, visit their website or email Mathew.