COVID-19 Shutdown Week #5: Insights from Webinars

For the past five weeks of social distancing, my life has revolved around six Ws: Walking (10,000+ steps a day), Working (on client financial education projects), Watching (television news), Writing (my new book and this blog), Wondering (what comes next with COVID-19), and Webinars (to learn and see colleagues). 

I am not complaining, however. I have a steady income, a beautiful new Florida home, a stash of food, good health, and financial security. So many others have it so very much worse. I recently attended five webinars related to COVID-19 and the CARES Act. Below are some key take-aways: 

No Quick Fixes– Economist Mark Zandi of Moody’s Analytics predicted economic uncertainty well into next year. Some 50 million workers (one-third of the workforce) will be affected by income shocks such as unemployment, furloughs, and reduced work hours. The economy will be “stuck in the mud” until there is an effective COVID-19 vaccine or therapy. Life will be different over the course of the next year. The script on COVID-19 and its impacts is still being written.

Major Changes Are Coming– Zandi predicted that some businesses will not return to their pre-COVID-19 level. People may not be traveling as much or attending conferences or ball games. Companies may cut their travel budgets. Office space may have less demand as employees get comfortable working at home and don’t want to return to long commutes. Events will start out with small groups instead of packed stadiums and we will all have to get used to physical distancing measures. Educational programs may also look different in the future after “the largest distance learning experiment in history” (a phrase used by Next Gen Personal Finance founder Tim Ranzetta, who is helping thousands of educators teach virtually).

Financial Wake-Up Call– Medical doctor/certified Financial planner® Carolyn McClanahan called COVID-19 a wake-up call to always be prepared financially for life events. Two actions that she recommends to clients are having 5 to 10 years of cash flow in cash equivalent assets to ride out stock market downturns and preparing advance directive documents such as a living will. Also, have difficult, but necessary, conversations with loved ones about end-of-life medical care preferences.

Breathing Room- One third of Americans did not pay their rent or made only partial payments this month. Podcaster Elle Martinez and Utah Valley University professor Ryan Law advised taking advantage of all available relief programs. For example, policies related to utility shutoffs, delayed payments, and moratoriums on foreclosures and evictions. Borrowers with federal student loans are permitted to defer payments penalty free until September 30, 2020. Forbearances and eviction moratoriums are not “free money,” however. The amount of debt paused or reduced will still be owed in the future.

Expense Juggling– If you can’t pay your bills in the short term, put money you would have spent on now-deferred payments toward other essential bills. Rework your budget and reallocate any money you are not currently spending (e.g., commuting costs and child care). Suspend voluntary retirement savings plan deposits, if necessary. For older adults age 72+, required minimum distributions (RMDs) originally scheduled to be taken in 2020 can be skipped this year. Free financial counseling assistance is available to Americans through the Association for Financial Counseling and Planning Education (AFCPE).

Getting Help Takes Time- Despite crashed websites and jammed phone lines, try to get all relief program money that you qualify for. Pace yourself and make just one contact per day because the process of getting through can be exhausting. Contact creditors before you can’t pay to let them know what you can realistically afford. Many are willing to work with their clients because it is better to get something than nothing. Get all agreements with creditors and landlords in writing.

Tax Considerations- Be aware that unemployment income remains fully taxable so set some money aside for quarterly estimated taxes. First quarter payments originally due April 15, 2020 are now due July 15. Second quarter estimated tax payments are still due June 15, 2020. Make sure your address and bank account direct deposit information are up to date with the IRS to prevent snags with recovery rebates (stimulus). Stimulus benefits (up to $1,200 per individual taxpayer and $500 per child under 17, phased out by income level) are not taxable. People who worked “off the books” are ineligible.

Individual Impacts Vary- Some people are doing fine, at least if they don’t look at investment losses, panic, and convert a paper loss into an actual one. If you still have a steady (or even rising) income (or defined benefit pension) and your discretionary expenses have decreased due to physical distancing measures, consider increased savings or gifting the cash flow increase. Another option is to spend money from cancelled travel/activities on human capital or home improvements.

Common Investing Error-Florida wealth manager Colby Winslow, speaking for University of Florida IFAS Extension, warned investors not to succumb to “action bias.” This is the tendency to think “I should do something” (e.g., sell stock) when a crisis event occurs. Short-term emotional reactions can lead to long-term mistakes and cause irreparable damage. Financial markets always run in an “S” shaped curve pattern. We don’t know where we are on the curve now but, at some point, markets will recover and people will say “That COVID-19 was something” like they did about the Great Recession.

I hope that you found this webinar summary useful. I enjoyed writing it. Stay home, stay safe, and stay healthy.

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