It is looking as if this thing is going to be with us for a while. Anyone else getting tired of the inside of their own four walls? (Not to mention the inside of their own psyche…) The shutdown has obviously been particularly hard on the people who have lost their jobs, but even with jobs, it has also been hard on those with small children [1], and just in general this situation takes an emotional toll. Interestingly, the people who are looking good now are the retirees – the formerly-dreaded “fixed income” sounds like a pretty good deal these days!
I was happy to hear Dr Fauci say the other day that “…this will end”[2]. I guess the question is just how to get from here to there.
It is likely that we could be in this for the long haul. Vaccines are slow to develop [3], and in the US at least, we are not seeing the kind of teamwork that would enable us to keep it under control with contact tracing alone. The alternatives are either a large number of deaths, or an economic shutdown/slowdown until something changes – both have an economic impact.
The drops in US gross domestic product for the first two quarters of this year have been staggering. (Gross domestic product, or GDP, is the monetary value of all goods and services made during a particular period.) Michael Keane is an economics professor and an old friend of mine, and I asked him how to put these numbers into context, to understand what they mean for the future. He said: “You could imagine scenarios where things recover quickly or stay depressed for a long time. For example, up to a certain point most firms can just ride this out, and when the lockdown ends hire everyone back… But beyond a certain point you get mass insolvencies and mass permanent job losses… A lot depends on how soon they can find a vaccine or get [it] under control.”
Those of you who have worked with me know that I am never a fan of optimism in financial planning. We plan for a modest or pessimistic situation, and then if it turns out better than that, the surprise is a pleasant one. Now seems like a good time to be extra conservative.
It feels to me as if in a strange way we’ve been thrown back 100 years. The institutions that we are used to relying on – schools, medicine, government – can’t help us much, and in many ways we are left to our own resources. People make their own masks, I see neighbours going shopping for each other, and hear older folks offering to read stories to the young ones. Households may have to band together to form private childcare/ homeschooling co-ops, and so on. In some ways, the situation can be “oddly positive”, as one client said. With childcare, commutes, travel and entertainment gone, many people are seeing drops in their expenses. If your income is stable, take the opportunity to save that money.
Consider what you need in order to get through this if it lasts another year. I have no idea if this is a worst case scenario, but it seems like a reasonable starting point. What do you need to do to support yourself, both financially and emotionally? Do you need to set up a homeschool co-op, or add to emergency savings? Formalize your office space so that you can work better from home? If your income is gone, do you need to move in order to reduce expenses?[4] My last newsletter showed how to map out your financial situation for the months ahead, to look forward and see how you will do.
Most of all, get some support. We are being challenged – financially, emotionally, logistically – in ways that are unprecedented, and it is taking a toll on people. Find someone to talk to, find a practice that helps you stay grounded. It can help to talk – it doesn’t have to be professional/paid, but nothing substitutes for a human being. A client said: “I miss the world” – this is a deep need. Create a structure and a schedule. We are creatures of habit, and a schedule can be very comforting.[5] One client said that doing his budget gives him a sense of structure, that it is a lifeline for him.
Take some time to consider what you need to put in place. Talk to others about it and make a plan. We are having to take individual responsibility at a level that is completely new, but that doesn’t mean that we have to be alone.
Plan for the worst and hope for the best – it sounds a bit dramatic, but right now it is very appropriate.
I have a limited number of reduced fee appointments available for those in need. Let me know if there is anything that I can help with.
References:
So many references this time that I decided to put them at the end, so as not to distract.
1. https://www.nytimes.com/2020/07/02/business/covid-economy-parents-kids-career-homeschooling.html
2. https://www.davisenterprise.com/local-news/fauci-talks-covid-19-with-sacramento-press-club/
3. https://www.cnet.com/how-to/coronavirus-vaccine-are-we-close-to-finding-one-heres-whats-happening/
4. For an interesting take on living without money, check out “The Moneyless Man: A Year of Freeconomic Living”, by Mark Boyle. Not saying that I would recommend this, but it does make the interesting point that “moneyless” doesn’t have to mean “homeless”.
5. Astronaut Scott Kelly described how he dealt with isolation in a good article here: https://www.nytimes.com/2020/03/21/opinion/scott-kelly-coronavirus-isolation.html