When confronted with something new, my natural inclination is to frame it in the context of an experience I’ve had. So, as I’ve faced the challenges this pandemic has brought to my personal and professional life over the last month, I thought back to my experience as a dad.
My oldest daughter had what you might call a propensity for vehicle incidents. I’m not proud of all the yelling I did at that point in our lives. But by the time my younger daughter was behind the wheel and I was confronted with similar “teaching moments,” I had valuable insights that allowed me to be more successful.
That’s a trivial example to bring up during this pandemic, but my point is — as I write this column in May — we have few experiences to guide our behavior. By the time you’re reading it in June or July, I hope we’ll have truly rounded the corner and are looking to the future. From a personal finance perspective, I believe there already are lessons to be logged and learned that will aid us the next time we encounter such a situation.
Here are a few early takeaways:
1. Our finances are fragile. Last year, the government shutdown reminded us that even those with seemingly reliable income streams are not immune from income disruptions. This year has been much more traumatic, with a self-induced economic shutdown that has seen unemployment skyrocket like at no other time in our history. The utility and importance of an emergency fund has once again been validated. Let this be the trigger that makes building this financial cornerstone a priority.
2. Asking for help is hard, but it’s necessary. A spirit of independence and self-reliance is a byproduct of service to our country. However, don’t let those admirable traits keep you from asking for critical assistance during a difficult time — whether that’s reaching out to a friend or neighbor, speaking to your bank or finance company, or talking to your employer. To date, I’ve been heartened by the many examples we have, at all levels, of companies and individuals demonstrating their desire to help. Getting it typically begins with an ask.
3. Less is more. I’ve often said that just because someone will lend you money doesn’t mean you should borrow it. The pandemic has driven home the point that the less debt you owe, the more flexibility and options you have. As we turn the corner on this virus, let’s not forget that lesson. Take advantage of the government and lender programs that will allow you to stay afloat today, but when things are good again – and they will be – commit to fixing your personal balance sheet. Pay down and off that debt!
4. News is helpful, until it isn’t. I’ve watched a lot of news over the last two months. You probably have, too. Do you find your mood ebbing and flowing with the latest headline? It’s important to stay informed, but you don’t want your financial — be they purchasing, investing, or spending — decisions to be powered by emotions. I’ve long been a proponent of adopting a “cool-off” period before major decisions. This approach might be applicable.
5. Scammers abound. When the government announced the first round of recovery checks, the fraudsters immediately commenced operations. Further evidence that fraud is a 24/7/365 activity. Stay alert.
6. Opportunities exist, even in a gloomy period. It can seem difficult to find a silver lining, but it’s usually there. This year it might come in the form of extremely low interest rates that allow you to refinance a mortgage or other debt. Perhaps it’s a battered investment portfolio that makes a Roth IRA conversion a pop-up opportunity, or maybe long-term investing in equities is a more attractive proposition. And, of course, there’s more time with the ones we love.
Well, that’s it for my first go at digesting what we’ve learned in order to map out a path to do better. It’s never too early — or late — to begin your personal assessment and implement your own improvement plan. Stay safe.