Financial Triage in the Age of Covid-19
BY MICHAEL SICURANZA
My wife is amazing. She is an instructional designer primarily helping faculty design courses for the online MBA program. Last week, her group was instructed to prepare the university to have ALL courses go online so that the students can continue to learn. As a result, Erin had to give a few courses before lockout happened. She explained to the Professors who had never used online tools before that a great online course takes 6-9 months to develop, but we don’t have 6-9 months, we have 2 weeks. So, she taught them to use online tools to triage their face to face courses. For those of you who remember MASH, the TV show, Hawkeye called what they did “meatball surgery” – not pretty, but effective in keeping people alive.
So, what does any of this have to do with investments and financial planning? Well, I thought since so many are suffering and unsure about the future, that we would put together a list of Financial Planning triage tools. These tools are not only for you, but also for your loved ones who may not have a financial planner. Many people are unsure about what they should be doing, and the financial impact of their decisions during social distancing and a potential quarantine. So, here is a list in no particular order:
CASH IS KING – There will be time to buy stocks at great prices, but if you are unsure how long you are going to be quarantined or how long you might be out of work, hoard cash. Most, at a minimum should have at least 3-6 months of mandatory expenses set aside. If you don’t, find ways to cut back. Preserve savings and checking accounts. Use those versus drawing out of your investments, if retired, while the market is down.
DON’T PAY DOWN DEBT – this ties with Cash is King, but in times of stress, I think it’s natural to think “I just want to pay that off so I don’t have to worry about writing that check”. If the interest is reasonable, why do that? What happens if you pay the mortgage off and you lose your job? No mortgage company is going to allow you to refinance without an income. Now you’re stuck and with no flexibility because your cash is gone.
REFINANCE – Rates are back to all time lows. If you have a mortgage and/or other high interest debt, might be a great time to consolidate, reduce payments or even future interest.
ADD A HELOC – If you have equity in your home, having an available line of credit as a back up cash reserve might not be a bad idea. This would be for EMERGENCY purposes only. Again, something you would want to do now when employed and in a stronger financial position. It is worth paying the $100 fee per year to access to capital.
REVIEW BUDGET – obviously tightening the belt is important during times of dislocation and financial stress. Take out the discretionary items but DO NOT eliminate things that allow you to function properly (exercise, nutrition etc).
SOCIAL SECURITY – If you are considering taking or delaying having someone do an analysis of the break-even point based upon the market change is important. It could completely change your retirement outlook.
TALK TO SOMEONE – We are social beings and being isolated, even with family, can be stressful. Talk to someone, stay in touch, ask a professional before making a financial decision. We are here at Affinity Wealth support the community at large and are willing to help answer those basic triage questions. There will be time for sophisticated planning and we are doing that with you, our clients but we know there are people in need out there that we can help. Give them our number if they need a sounding board.
We hope that everyone is safe and healthy. This too shall pass and we will be here all along the way.