Investments

Lessons Learned from Coronavirus

By Barber Financial Group

April 13, 2020

Lessons Learned from Coronavirus

The Silver Lining(s) in the Coronavirus Cloud

Today we want to spend a little time talking about the potential good things that will come out of the COVID-19 pandemic and the sweeping attempts to deal with it, including the closure of a good portion of our economy for a brief period. Every cloud has a silver lining; we’ll explore a few that we see coming out of this one.   

We also want to reflect on some planning basics that have reemerged as essential financial principals in the face of mass layoffs and furloughs caused by something entirely out of our control. They are great rules to live by, just in case something like this happens again. Call them “Lessons Learned from the Coronavirus Pandemic.”

Let’s start with the good things that may come out of this pandemic.        

Lessons Learned from Coronavirus: Good things may come

A Generation of Super Savers

The first and most obvious would be that we may have inadvertently created a generation of super-savers. For the first time in most of our lifetimes, millions of people went from gainfully employed to unable to work in a matter of days, with no time to prepare themselves. The closure of stores, restaurants, bars, factories, and churches, to name a few, left the unprepared in real financial peril.  

The federal government and the private sector have stepped in with massive support for those people, but it’s kind of like a parent comforting a child after they touched the hot stove and burned their hand. While the child appreciates the comforting from their parents, they NEVER want to touch the hot stove again. It’s just human nature. So, my best guess is that once things get back to some sense of normalcy, we’ll see personal savings rates higher than we’ve seen in a very long time. No one likes getting caught off guard, certainly not twice.   

Seniors Adopting New Technologies

Another obvious good that may come out of his is a much higher adoption of technology by our senior population. Though many have adopted the use of technology, many have refused because they don’t want to learn to use it, or they feel it is too impersonal. Suddenly, in the aftermath of stay at home orders, that impersonal technology can instantly connect you to your loved ones who you wouldn’t otherwise be able to see.

I believe that we’ll see a sweeping adoption of the available technology that allows us to gather together with those we care about even if we can’t actually BE together. This year we celebrated Easter together with a family Zoom meeting that allowed us to all be together, at least on the computer screen, and talk to one another virtually. We even took a family picture virtually. It wasn’t as good as being there in person, but it was the next best thing. I can see this time of separation leading to the elimination of the stigma of meeting virtually, and instead, to its widespread adoption.   

The Growth of Technology

That leads me to the technology itself. The incredible amount of demand in the digital domain will undoubtedly lead to vast improvements both in the capacity of the digital infrastructure and in the technology applications that we use. This time of physical separation will create a lot of competition for users of virtual meeting applications, and that will mean rapid and meaningful improvements across the board to attract as many users to a particular platform as possible. At the office, we’re currently using three different products to meet virtually, both for client and internal meetings. All three have pros and cons, and they’re all in competition with one another. I’m not sure which of the three will eventually win the battle among themselves, but I know for sure the ultimate winner will be you and me.    

Rekindling Family Time, Even if it’s Virtual

Finally, there are human interactions and personal priorities likely to change for the better in the aftermath of the pandemic. Just a few short weeks ago, parents were running their children to soccer, band, basketball, football, baseball, dance, karate, gymnastics, choir, plays, concerts, and a million other activities daily, sometimes to multiple events per child. 

Life was a rush from the time they got up until the time they put the kids to bed. All the activities were supposed to make the kids well rounded little human beings, and give them something to do to keep them out of trouble. In reality, too many people put their kids in too many different activities and neglected the most important activity of all, family time. Their furious pace wore them, and everyone around them, out. 

As a grandparent in these times, I can personally attest to how tiring all these activities are for us, and we only go to the games most of the time. But with six grandboys, all involved in some sport, there’s no time to catch your breath some weeks.

More Time Being a Family

My belief, my fervent hope, is that coming out of this will be a renewed sense of what is truly important for families. Like eating dinner at the table together every night, talking to each other without a phone in your hand, and exposing your children to fewer outside activities and to more of your time and attention. In other words, more time being a family. I also hope that the much slower pace of life that has emerged over the last few weeks persists once the fear and danger is gone. I know this won’t last as long as I would like, but I hope we can take it in and realize there is value in it.    

And, speaking of value, let’s take a look at some valuable lessons to be learned from coronavirus as well.  

Lessons Learned from Coronavirus  

1. Have a cash reserve

Generally speaking, everyone should have an amount of cash set aside in a savings account equal to three months of living expenses. If you work in a field in which you may have trouble finding a job if you’re laid off, consider having closer to six months of living expenses set aside. This money should not be invested in stocks or bonds but should be kept in a money market or savings account. The interest rate you earn will be minimal, but that isn’t the most important thing.

Once you’ve reached a comfortable dollar amount saved, somewhere between three and six months of expenses, forget about this money. It’s not meant for a down payment on a house or a vacation. Break glass only in case of an emergency, such as a lost job or the need to pay the mortgage, a larger than expected home repair, or significant medical expense, etc.  

2. Know your budget

It’s hard to know how much to have in your emergency fund if you don’t have a good handle on what you spend each month. Fortunately, this doesn’t have to be a painful process. Here are some options for analyzing your expenses:  

  • Integrate credit cards, bank accounts with your financial plan. 
  • Use an online tool like Quicken or Mint.  
  • Do it by hand (review monthly checking account or credit card statements, then categorize expenses and track ongoing). 

3. Know your risk tolerance

The ancient Greeks had a maxim, gnōthi seauton, “know thyself.” Be honest in your assessment of your own tolerance for risk. This most recent market crash is not the last time it will happen. We saw stocks crash by more than 30% in the span of a month. Even a portfolio considered to be of moderate risk (60/40) was probably down by around 20%. How did you feel mid-to-late March when you looked at your portfolio? Did you lose sleep at night? Did you feel sick to your stomach? Or, did you want to “stop the bleeding” and sell out of your investments? The worst thing you can do is sell your investments after the market has crashed. Instead, if you have a diversified portfolio of investments, wait for a recovery, and then consider making adjustments. 

4. Have an investment plan

Stocks will go back up and will crash again. Probably several more times during your lifetime, for reasons we don’t even know exist today (six months ago, no one had even heard of the coronavirus). Understand what you want your money to do, and what you need it to do. Those aren’t always the same. Determine what actions you will take in your portfolio when stocks recover. What about in the meantime, with stocks still ~20% below their previous highs? Are you buying or selling right now? While you can’t predict the future for investment returns, you can formulate a game plan now.  

If you’re picking up on a theme here, good for you, the theme is planning! There is no substitute for planning. It is one of the most important lessons learned from coronavirus, and in these uncertain times, it’s even more critical. As a client of Barber Financial Group, you’re highly likely to have a plan in place that looks at all the areas we just covered. If you’re not a client of Barber Financial Group, and you want to know if you’ve got all these bases covered, or if you know someone who needs to know, give us a call and we’re more than happy to help. You can reach us at 913-393-1000 or simply fill out the form below. We’ll meet with you virtually to get the process started and get you the answers you need.   

Until next time, stay healthy, stay happy, and stay safe.    

Shane Barber and Jason Newcomer for Barber Financial Group 

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Investment advisory services offered through Barber Financial Group, Inc., an SEC Registered Investment Adviser.

The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.