The COVID-19 pandemic can be a complex concept to process emotionally. The virus is affecting so many areas of our lives — health, relationships, education, work, hobbies… and of course finances. Some families are experiencing a serious crisis while others are experiencing only minor changes to the routines.
I’ve been asking myself “How should I think about this and feel about it?” What can we learn from the COVID-19 pandemic? And it’s complicated. I want to be sensitive to anyone whose family has been affected directly. I want to be appreciative of healthcare workers who are putting themselves at risk to care for others.
Personally, COVID-19 has started to affect my family — I recently learned that my great uncle has been confirmed positive.
Within the personal finance online community, the virus has made its presence felt. Paula Pant from Afford Anything, one of my personal favorite blogs and podcasts, chronicled her fight with the virus on Twitter throughout April and early May. Thankfully, she has now tested negative for the virus.
But amidst all of this discomfort and uncertainty, I have personally felt some moments of clarity. Here are a few things that the COVID-19 has brought more into focus — 6 things that you can learn about personal finances amidst this pandemic.
1. The stock market is not dependable in the short-term
From mid-February to March 23, the S&P 500 index dropped about 34% from fears of the pandemic and its effect on the economy. 34% in one month! That’s definitely unnerving, and that degree of volatility can cause some investors to panic.
But, selling off your shares due to fear after a big drop in the market can actually be one of the worst things you can do. You’re “locking in” your losses and the market may recover before you’re able to re-invest. The March dip in the market is a great reminder of why I choose to only invest in the stock market for long-term goals. In fact, this is one of my personal rules for investing. (You can read my full list of 7 self-imposed rules for investing here.)
I talked about the COVID-19 scare and long-term investing with the writer of the Keeping Up With the Bulls blog.
She shared, “Needless to say, between the daily news on the pandemic and experiencing my first few limit downs it was a nerve wracking March!
I always keep a list of stocks I’m watching and buy a few shares here and there (in addition to my automated 401k contributions) even when I think the market is surprisingly high. This helped me continue to stay the course when we had no idea how far the market would fall. It was tempting to get into new areas like trading options but I reminded myself I am a long-term investor, not a day trader!
I may have missed out on some wild short term gains but in the long term I’m still pretty confident sticking to what I know and continuing my investing strategy will get me farther. I elaborated more on investing in a volatile market in this post on my site.”
If you’re investing for long-term goals, you can expect short-term volatility rather than being surprised by it.
2. Flexibility is critical
Businesses and investors too have faced risk and new changes.
Flexibility in real estate investing
I recently talked with Rachel Hernandez from the investing site Adventures in Mobile Homes. She explained how she’s had to change her rental process because of COVID-19.
Rachel shared, “Before COVID-19, I was able to freely show the homes I had on the market in person.
Since the pandemic, I have not been able to do that due to the shelter in place restrictions in my area. So I’ve had to adjust and come up with a system of showing homes on the market without being there.
Now I post pictures online of homes I have on the market. Those who are interested are able to take an application in a box near the front porch of the homes I have on the market. Then they fax in the application and the information needed to apply.
To give people peace of mind, I tell them they can go through the home once they are approved one last time before any paperwork is signed. This helps to calm down any questions or fears they have about the home.
This is just one of the things I’ve had to do to run my real estate investing business. Through experience, I’ve learned how to adapt when challenging situations arise.”
Flexibility in financial planning
Ultimately, flexibility can bring you significant financial gain and unique opportunities. Better yet, flexibility can also buy you something more valuable than money — more control over your time and a sense of balance in your life.
This is the main benefit of semi-retirement and my motivation for creating this site. You can read more about semi-retirement planning here and its benefits compared to traditional retirement and FIRE here.
3. Emergencies are real
A global pandemic certainly qualifies as an emergency, especially if you lost your source of income or actually contracted COVID-19.
In the personal finance blogging world, it’s easy to get the feeling that emergency funds are just a cliche that earns you a lower ROI than other investment options. But COVID-19 is a great reminder that emergencies can and will happen.
Having an emergency fund can help you meet your short-term financial needs and can also protect your investments and minimize financial anxiety.
4. You can’t depend on the government for your every need
Regardless of what your political views are on what the government should be doing, the COVID-19 pandemic has made it clear that you can’t expect the government to meet all of your financial needs.
Millions of people lack health insurance that could make treatment for COVID-19 affordable.
When the government has stepped in, funding has run dry at times.
I don’t have all the answers and I don’t want this post to become politically-oriented, but I want to make it clear that you need to be able to help yourself financially if you want to avoid a bumpy ride.
Financial planners famously use a “three-legged stool” metaphor when discussing retirement. The metaphor illustrates that a stool needs all 3 legs to be stable. In retirement, planners traditionally review 3 income sources for retirement — investments, annuities/pensions, and government support like Social Security.
Likewise, COVID-19 is a reminder that we need a similar multi-faceted approach to supporting ourselves financially in any stage of life.
Traditional W2 income alone is not enough and relying on the government is scary! Combining income and possible government support with savings and even other income or investments is the most secure approach.
5. Each day is scarce and valuable
Any tragedy or major event can be a strong reminder that life is short. Time is limited, and therefore time is extremely valuable.
Let’s be reminded to enjoy the beauty in life even in the midst of the COVID-19 pandemic. Take a walk. Call a loved one. If you’re a person of faith, this can be an opportunity to dive deeper into it. Or you can even pick up a new hobby.
If you have some unexpected time to kill while you’re at home more, try taking a free course online! I’m personally taking a course through Coursera. Coursera is not a sponsor of Semi-Retire Plan, but I really have enjoyed the experience. Khan Academy and other sites offer free courses as well.
The course I’m taking is about music theory, which is something I’ve been interested in learning more about for years. I’m a long-time hobbyist guitar player but I’ve wanted to learn more. I even recently bought a bass guitar. It’s added some fun to my numerous recent work from home days.
Find something to enjoy.
I’m challenging myself to not wish the next few months away. I don’t want to just “fast forward” to the end of the pandemic, because that would be missing out on life. Our time alive is valuable and scarce.
6. Money isn’t more valuable than human life
The COVID-19 pandemic has put political and healthcare leaders into a precarious ethical position. There’s a direct tradeoff between short-term economic activity and social distancing to save human lives. How should they decide what the priority is, and to what extent?
Citizens are grappling with similar questions as we struggle to find our own opinions and decide what activities to participate in.
I find it to be totally bizarre to hear political leaders write off the value of human lives. The lieutenant governor of Texas suggested that grandparents and senior citizens should be willing to put their own health at risk for the sake of the economy. Other politicians seem to be making similar (yet more implicit) calculations.
As of March 14, the CDC count has totaled nearly 84,000 confirmed American deaths from COVID-19. Some political leaders are framing this number as acceptable or some kind of success at controlling the virus.
I recognize that I’m making a complex issue sound black and white, and that’s not accurate. There is an alarming amount of gray area here.
Political and health policy leaders are essentially being asked to answer an impossible question — how many economic dollars is each American life worth? Is growing the economy by $X worth it if it might cause X number of Americans to die? It’s disturbing to attempt to answer.
I don’t have a solution for that calculation, but I know that the premise of the question is upsetting.
Let’s not make people worth less than dollars. Dollars are things — imaginary social constructs, even. People matter.
The economy matters and personal finances matter too, but only as tools. Money is only matters if it helps you reach something more valuable — freedom, peace, experiences, or time spent with people you love.
I’d love to hear from you. How are you grappling with these difficult questions and situations? What can we be doing to keep our focus on the things that matter most to us in life?