Financial Musings on Corona

While I wrote some initial thoughts on the coronavirus and its financial impact in a recent blog, unfortunately it is as relevant now as it was then, and there are many additional issues (and some topics worth repeating) I would like to raise.  This pandemic has the possibility of impacting our finances for much longer than a few months as the fallout from the closure likely will cause the economy to enter a major recession, with many lost jobs, reduced income levels, defaults, losses in savings and investments to name just a few of the projected outcomes. 

• The current restrictions left many people with a lot of unstructured time and varying levels of responsibilities but filling the day with specific tasks can provide a sense of accomplishment. Why not take the opportunity to create a substantive financial plan that encompasses all elements of your finances including an updated budget (after evaluating all your current expenses and revenue) and an assessment of all your current investments, including pension funds, and their risk level, insurance coverage and costs.  In particular, those approaching retirement need to look at their current policies and make decisions about when to annuitize their policies, reduce old insurance that is not relevant anymore and ensure their retirement budget is appropriate given the new circumstances. 

• While we are moving towards a more normal routine, we likely will find ourselves having lots more time with our children.  Take advantage of the time and start educating your kids about money and finances. Discuss with them the new financial reality that coronavirus has created. Play monopoly with them to provide insights into property management.  Show them educational financial videos about financial topics, like Ray Dalio’s “How the economic machine works”.
• Being quarantined allows us to take advantage of the lack of spending opportunities and to lower our overall expenditure.  The absence of competition with the ‘Jones’ or ‘Cohen’ family next door allowed us to create our own level of economic priorities in our lives.  Some necessary expenditures that we thought we couldn’t live without might become expendable depending on whether our income level has been reduced recently or the need to start an emergency fund.  I believe most people, even with increased food spending and all the food insecurity hoarding, still managed to spend much less money this month. New circumstances (however unusual) often open our eyes to new opportunities.  Simple yet free activities like going on hikes that were not necessarily attractive family activities in the past might look much appealing these days.
• Economic crisis often leads to new economic activity and entrepreneurship on a national or international level.  On a personal financial level, consider diversifying your income streams.  Are there online activities that you can develop? How about hobbies that can be advanced into side jobs?  Diversifying income streams can improve long term economic prospects and give you more fallback options if you lose your job. Even during the good times, extra sources of income can allow you to solidify your emergency fund of three to six months of living expenses.  How many people today can say with certainty that they do not need to have a backup plan in place? 
• Many people have asked me recently about transferring and converting money given the dramatic movement in various currencies.  The USA dollar has remained the dominant fiat currency of choice around the world and has strengthened against most other currencies.  The shekel however, after a volatile drop in value at the beginning of the crisis, has strengthened vis a vis the dollar and other currencies.  The US and its money printing economic stimulus package will probably not stimulate inflation due to weak consumer demand but is likely to lead to future US dollar currency weaknesses as the economy shrinks and debt grows.  Israelis spending shekels need to ensure they have enough shekel exposure in their investment portfolio to protect their purchasing power as they age.  
• US citizens who have or will receive stimulus checks of $1200 for person and $500 per child (and the 500 nis per child in Israel), should think carefully about what to do with the windfall. Especially if that money isn’t needed immediately, it might provide an excellent opportunity to fund that necessary emergency fund… 
• If you have lost your job and are not sure if you can meet your existing obligations, especially your mortgage, the banks are offering a deferment of your mortgage for a number of months, without penalties.  Contact them for details.
• Many people have paid in advance for services that they are entitled to receive a refund.  Flights and hotels are obvious examples, but there are other ongoing expenses like school tuitions, chugim, daycare, summer camps and others who are also obligated to refund money for services not provided.  Review your budget to see who might owe you a refund.
• Initial government assistance was being offered for employees laid off or put on unpaid vacation.  In recent weeks, additional assistance has been expanded to include the self-employed and even owners of small businesses, as well as government grants to those over 67.  Check online or with your accountant for details. 

Updates on the virus and its financial impact have been coming fast and furious.  Reach out for information from friends and/or professionals to ensure you are maximally informed and prepared.  While we can’t plan for all eventualities, we can do our part to ensure we stay healthy physically, mentally and of course financially too.  Wishing all the sick a refuah shleima and may we merit to see a true yeshuah very soon.