“COVID-ed” Lessons: Four Things the Pandemic has Taught Us About Savings in the Face of Financial Uncertainty
In my life and career, I have found three things overwhelmingly true with money:
1) The unexpected is inevitable- you better be prepared financially.
2) To accomplish something meaningful with money, a commitment to saving is implicit.
3) Wealthy individuals all seem to resiliently pursue a discipline of saving money despite their circumstances.
The common denominator across these three principles is simply a commitment to saving money. It is the foundation upon which all other financial success will be built. And 2020 has challenged that resolve thus far.
Although COVID-19 related restrictions are beginning to ease, many people continue to help slow the spread by staying home and self-isolating. There are still unknowns related to the pandemic and how it will play out, undoubtedly keeping us all on edge. Over the past few months, we’ve been forced to acknowledge that the unexpected can and does happen and that we need to take the steps necessary to prepare ourselves and our families for those times.
As the world has dealt with the COVID-19 pandemic over the last several months, we’ve seen an unprecedented impact to global stock markets. The decline in US and foreign equities was surprising in both its severity and speed, with the S&P 500 falling more than 30% in just over a month. This sharp drop from recent highs caused some investors to panic and race for the exits, preferring the safety of cash or treasuries to the volatile stock market. While getting out of the market during a “freefall” might seem like the best move, over the long run it can actually do more harm than good.
During times of market turmoil and economic uncertainty, its tempting to focus exclusively on risk – risk to your portfolio, your income and your plans for the future. And making sure your portfolio is aligned with your appetite for risk and with your time horizon for investing is critical. But focusing exclusively on the risk of losing money can lead investors to overlook the opportunities market declines may bring. Baron Rothschild, an 18th-century British nobleman and member of the renowned Rothschild banking family, is famously credited with saying that “the time to buy is when there’s blood in the streets.” He took his own advice and made a fortune in the panic that followed the Battle of Waterloo against Napoleon.
COVID-19 has impacted nearly every aspect of the economy. When President Donald Trump declared the virus a national emergency at the beginning of March, standards of living rapidly shifted: governors enacted stay-at-home orders, learning institutions closed and consumers suddenly faced unprecedented challenges.1 While the travel and tourism industry is seeing record lows, demand for staple foods and hygiene products has surged.
When financial markets fall and the economy stumbles, the phrase “this time it’s different” is commonly heard. This is a natural reaction as the strongest emotions tend to arise at the onset of a downturn when uncertainty is greatest. But if history has taught us anything, it’s that the most practical strategies to implement in any downturn are fundamentally the same each time regardless of market and economic events.
The COVID-19 pandemic might be unlike anything we have seen before, but the uncertainty is nothing new to a financial market that has remained strong and impervious over time. At times like this, looking at history and incorporating its lessons is always a prudent strategy.
When dealing with times of heightened uncertainly, a sense of heightened uncertainty, we all try as best as we can to try and contain the unknowns in our life. This is especially true when it comes to our personal finances. See three common knee-jerk reactions people often consider that could end up hurting your goals and objectives in the long run!
We want to help you start your long, Memorial Day weekend with a series of good news articles from the past week highlighting positive news globally, around the United States, and in the Georgia area. We hope these articles help brighten your day! AFA has recently made a significant donation…
Are you an investor who was planning to retire in the next ten years? Do the current market conditions make you fearful for your future? The recent decline in domestic and global markets has been undeniably rough for investors, especially those nearing retirement. Our 11-year bull market run came to an end in March when all major domestic indices dropped dramatically in one of the swiftest declines into a bear market we have seen. Although the markets have since recovered from those bottoms very significantly, uncertainty abounds due to the ongoing global pandemic. It is only natural to be concerned about how to approach retirement against a background of such uncertainty and volatility.
While this summer will definitely not be normal, most of us will be reenergized by the boost beautiful, warm weather brings. Various outdoor activities are now actually being encouraged; Marty Makary of the Johns Hopkins School of Public Health said, “The outdoors is not only good for your mental state. It’s also a safer place than indoors.” Makary has an Opinion article in today’s Times, called “How to Reopen America Safely.”
What have you been doing to keep yourself busy throughout the past few weeks? Have you picked up any new hobbies or TV shows? We recently traded ideas within the AFA team to help each other stay busy (and sane!), you can check out what everyone has been doing here!
Nearly two months after “social distancing” and a life in quarantine began, we all are adjusting to new routines and new norms of precaution. Financially, more and more people are wondering what can be done to ensure their families will be ok on the other side of this pandemic.
Resiliency is one of the characteristics I most admire in others, and that I have always tried to foster in my children and live out in my own life. And we certainly have an opportunity in these unusual times to practice it on almost a daily basis. One of my favorite quotes on the subject speaks to the personal growth that can come from difficult times: “On the other side of a storm is the strength that comes from having navigated through it. Raise your sail and begin.” — Gregory S. Williams I am sure many of you have developed ways to cope and even thrive over the last few weeks as you have adjusted to the “new normal” that comes with quarantine and social distancing. But I wanted to take this opportunity to share some of the best resources we have found to help us all emerge on the “other side of the storm” stronger than we began.
As most everyone can attest, things are different right now! Dining out hasn’t been an option until recently, seeing a movie in a theater seems risky, and going to the gym seems wrought with potential coronavirus exposure. For those of us who enjoy exercising, we’ve had to change our routines to adhere to “stay at home” orders and social/physical distancing. We’ve needed unique ways to maintain our exercise regimen. Thankfully, there are great alternatives to a public gym and I’d like to share a few of those options with you. The first exercise alternative is an “old-school” option that is tried and true!
There is an old Japanese proverb that goes like this: Fall down seven times; stand up eight.
Right now, it is important to remember that proverb and heed the lesson. The financial markets are like so many other things. Sometimes it seems that we take two steps forward only to go one step back. But, to help understand our current situation, it is helpful to look back at similar times in the past. Each financial downturn is different, but all have common elements.
As we move to the end of April, there are promising signs across the globe that efforts to “flatten the curve” are having a positive impact on the spread of COVID-19. We also continue to see the generosity of the American people and those around the world as we pull together during the pandemic. We hope you, your families and your friends are healthy and making the most of this time. Here is some good news from the past week to brighten your day and take you into the weekend.
Two weeks ago, Georgia Governor Brian Kemp issued a “shelter in place” order for the state of Georgia to fight the spread of the COVID-19 virus and its effects. As a result, we are in a time of immense change and struggle for many people and businesses. In the midst of all of this, working together, we can see inspiration and hope. At this time, it looks like the cumulative efforts of Georgians and Americans overall are having a positive effect of reducing the effects and spread of COVID-19. The news from around the world seems to be getting better as well. We hope you, your families, and your friends are healthy and well. We would like to share with you some good news from this past week.
The ongoing COVID-19 pandemic has caused significant changes to everyday life as we know it. One of the most prominent change is the push for employees to work from home (WFH) rather than continue to operate out of shared spaces. For many young professionals, working from home – at least part time – is nothing new. I’ve talked with several friends who have transitioned from working at home two to three days per week to full-time, and even more who were already 100% WFH. But for the rest of us who are venturing into a work from home routine for the first time, it’s important to take steps to maintain both our health and sanity. Here are four steps I’ve found helpful in combating some of the common pitfalls of WFH…
Today would typically be a day where the entire sporting world would start to focus on the state of Georgia for the 2020 Masters. For golf fans, the good news is that there will still be a 2020 Masters Golf Tournament that has been rescheduled for later in the year. For all of us, the greater news is that we continue to see the ingenuity and generosity of Americans, as well as those around the world, coming together to help combat COVID-19. We are also starting to see signs of a turning point and potentially light at the end of the tunnel for some regions in the world. We hope all of our clients are staying well and invite you to take a brief break to peruse our latest installment of “Good News” for the week.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program, the initiative provides 100% federally guaranteed loans to small businesses.
Today, we are in the midst of an unprecedented global event that has had a dramatic effect on both our financial and personal lives. Much is in the news about what we can do to care for our health and the well being of our neighbors and loved ones. As events unfold, it can be easy to feel that we do not have control over things we once perhaps took for granted: our money and our health. But there are some things that each of us can do now to take some control back on the financial front.
When will I get my check? Checks are supposed to be produced “as rapidly as possible.” Mnuchin has hinted they will come in April, but it’s been suggested that could take up to two months. One thing that is true: if you use direct deposit, you’ll get your money faster.
Wait, how does a phaseout work?
As you likely have heard, in response to the unfolding COVID-19 global pandemic, Congress has passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the President signed it into law on March 27, 2020. It is a $2 trillion emergency fiscal stimulus package designed to help ease the impact of this health crisis on American workers, businesses and the economy. At Atlanta Financial, we have summarized the new law for you and tried to answer some frequently asked questions we hear from individuals as well as business owners.
In light of current events and potential financial difficulties caused by the COVID-19 outbreak, the Internal Revenue Service (IRS) has postponed the 2019 federal income tax filing and payment deadline until July 15, 2020.    Federal income tax payments due on April 15 2020 are now due July 15, 2020 without penalties and interest regardless of the amount owed (up to $1,000,000 for individuals). Taxpayers do not need to file an extension unless they need additional time beyond the July 15, 2020 deadline.
Considering everything going on, we want to share with you a recent podcast episode our team recorded to provide insight on the virus, the financial markets, and US economy now and moving forward. Here you can listen to the FIT™ Perspectives Podcast, episode 16 entitled “COVID-19 and the State of the US Markets, Economy.”
As we move toward the end of the first quarter of 2020, it can be difficult to ignore the dramatic headlines that seem to change on a daily basis. Election, impeachment (now in the rearview mirror), tariffs, coronavirus. They all compete for our attention. But, does any of this really make any difference when it comes to managing your portfolio and planning for your financial future? Let’s look at some facts.
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