Just in case we thought we were actually in control of anything, along came a minuscule virus and, at this time of writing, is wreaking havoc on a global level – from both a health and financial perspective. In many countries across the globe people’s plans, from the most basic to the most elaborate, have been cancelled or downsized, as they are forced to limit movements out of their home.
It may have taken some countries longer to recognize the health threat, but now everyone is giving the same message. Washing hands thoroughly and frequently and keeping a social distance of 2 meters on the occasions when you absolutely have to go out have been proven to stop the spread. The sooner everyone takes those steps the sooner the situation will improve, with G-d’s help.
When your job disappears
One of the black humor jokes going round Israel is “who would have ever dreamed that the shelf stacker in the supermarket is more crucial than an El Al pilot”. That comment addresses the incredibly harsh reality that thousands are now facing as entire sectors have been closed down, and in Israel the employment directives are that all companies still operating should be doing so on a minimalistic level.
If you have been affected by a loss of income, make sure that you are up to date on the economic measures the government is offering to help people. As the situation evolves in Israel the government’s restrictions have been getting more severe, and the conditions for aid are being updated almost daily. For example, at this point banks are offering an option for short-term deferred mortgage repayment, applications for employment benefits have been made less bureaucratic, and restrictions have been eased so that more people are eligible. The Electricity Company has agreed not to cut off anyone who can’t pay their bill, and some cities are waiving commercial arnona payments for the short term. The self-employed are also entitled to a monthly stipend. As I mentioned this is just a partial and constantly changing list of some aid in Israel.
When the markets are in freefall
Whereas I’m not minimizing the severity of the current crisis, the financial markets thrive on stability and never react well to panic situations. And panic breeds panic. People watch their investments tank and sometimes their knee jerk reaction is to pull out their money as soon as possible. History has shown that pulling out of the stock market after a crash is likely the worst possible thing to do. Major decisions should be based on long term financial considerations, and hopefully your assets risk profile reflects your long term needs. If you are having second thoughts about how much risk you are comfortable with in your portfolio, speak it through with someone who experienced the market for more than the last ten years of bounty. Decisions taken on impulse are often regretted and your finance decisions even more so.
If you have an investment plan in place you can relax. Your portfolio has been structured to take into account your short and long term needs, and your regular meetings with your financial advisor ensure that your portfolio always reflects your changing needs. If you do not need those funds in the short term, it is counter-productive to keep focusing on what is happening now, rather you need to take comfort in the fact that markets tend to recover quickly. After an incredibly long bull market we are now in a bear market. Whereas no one can say when the market trend will change, I believe it ultimately will recover. It is crucial to stay calm and be patient.
What are we supposed to learn from this?
Life is always a learning curve, we just don’t always see it that way as we are caught up in our day-to-day existence. Until something as huge as the coronavirus comes along and we have no choice other than literally to stop in our tracks and contemplate our lives and needs.
- Social responsibility – youth often feel that they are invincible and can ‘do their own thing’. In the case of coronavirus for the most part they are right from a personal health perspective. They are generally not a high risk group and yet they have to curtail their movements for the greater good, to protect those they might unknowingly infect. Approximately 80% of those who contract the virus will have mild symptoms, and yet countries are going into lockdown to protect those who will be adversely affected, and try and stop health systems from crashing. We are all responsible for each other and our actions have the potential to have a huge impact those around us. The coronavirus is ramming that lesson home to all of us.
- Emergency funds – those who don’t have emergency funds in place now will not be setting them up during this period of instability. However, this harsh situation is showing everyone very clearly how important these funds are. During all the years that I have been advising people on the importance of having an emergency fund of 3-6 months’ cash resources, I have never seen a scenario such as the one we are currently experiencing where so many might need to access emergency resources overnight. Some clients over the years have been dismissive of the emergency fund concept, despite my saying that none of us knows when something might happen. When we return to a more stable financial footing, a personal emergency fund is one of the first things that should be set up by everyone.
- Diversified streams of income – in Israel unfortunately we have had other periods when, for example, the tourism industry has been hit due to terrorism. During those times people whose jobs were in that sector suffered a substantial decrease or loss of income. Now many other sectors are seeing the fragility of their work. Use this time to try and think creatively if there are other areas that you can develop that could give you a simultaneous or alternate stream of income should your area of employment be insufficient, now or in the future.
- Prioritizing our time and money – the coronavirus is forcing us to literally reset our lives as we have to get back to the basics. No one knows things will return to normal, and from a financial perspective ‘normal’ post-coronavirus might not be same as ‘normal’ pre-coronavirus. In addition to virtually the entire world’s population having taken a huge financial hit from investments and loss of income on an individual level, governments will need to find the funds to offset the billions they are currently paying to help their citizens (maybe through increased taxation or inflation). This means that for the foreseeable future even those fortunate enough to have savings should look at their expenditure and prioritize what will be good for their body and soul. So many times different clients have told me that they can’t possibly reduce their budget. Now we are all being forced to make changes, and it can be done because we have no choice. At times it might have felt as if our spending was out of control. Take weddings as an example – in Israel people are being forced to hold weddings with only ten people. I assure you that the happiness of the couple in their future lives together is not related to the size of the wedding. And now they might even have a very nice nest egg with which to start their married life, from the event cost savings.
Yes, the situation is incredibly stressful and challenging. Our normal interactions of handshakes and hugs, visiting grandparents and friends have had to be curtailed to protect the population. However, there are positive steps we can take. In addition to connecting with family and friends via phone or email, we can also take a step back and evaluate how our finances fit into our new simplified home existence. I think there is a lot we can learn from this unique period of time.
Wishing everyone good health and financial stability. May we become better people from the strange global reality that has become our life. Chag kasher vesameach!