By When it comes to financial planning and investing, it’s easy to put money into your work 401(k) or investment account, and buy the indices. When the economy is roaring and the markets are up, they typically follow. On the financial planning side of the equation, when we’re seeing markets that seem to only go up, it’s simple. It just comes down to you saving money, and that pot increasing until you’ve reached the amount you need to retire. And honestly, I’m all for that type of market! I mean, who wouldn’t be?
That said, we’ve found ourselves in a quandary lately. Without going into any details about the pandemic, our economy across all sectors has significantly decreased. This new world we find ourselves in includes a stock market that’s in a similar place as it was in September of last year. And yet, the world we live in looks nothing like the world we lived in then.
I also won’t go into everything that has been cancelled (or lost forever) due to Covid-19, but I do know that the stock market is forward looking, and is projecting the re-opening of America. Every month as we reopen, things will (hopefully!) get a little better, and I’d love to jump on that train of thought. It makes it easier to refocus only that magic number that people need to retire. Unfortunately, my fear for all of you still working is that the coming reality coming will not be that simple.
As a realist, my fear is that, even if this virus disappears, we’re still going to be dealing with many of the precautions that have been put in place, which could slow the economic recovery across our society. It’s more difficult to communicate and complete a transaction while wearing a mask. The six-foot rule means fewer people patronizing businesses at any given time. I won’t even go into the effect on business travel and vacations. The bottom line is, as a consumer services-driven country, the slower those services can be delivered or experienced, the slower the economic recovery. Money has to be in motion, and it could take a significant amount of time to return to pre-pandemic levels.
Now maybe you’re thinking, “Yeah, I get that Dave. What’s the issue?” Well, if, due to all of these safety precautions, we don’t have enough economic activity, in a few weeks when the paycheck protection program (PPP) runs out, we could see layoffs of the people who aren’t currently on unemployment.
In addition, at the end of July when the benefits run out for all of those people who did file for unemployment, there may not be jobs to go back to if the economy is slow to recover. I’m also worried that many of the employees who’ve been designated as essential may not be essential anymore if the company that employed them goes under.
I say this not to cause fear or panic (we’ve got plenty of that!), but because I am truly concerned about what happens to all of us in the economic reality we find ourselves in. And I believe in the value of a financial planning team when markets are uncertain.
In the coming months there will be folks who need attention beyond what’s in their portfolio. While we do handle portfolios of course, and that seems doubly important when things are chaotic, I believe the great value we offer in times like these is being a sounding board when life throws you for a loop. Our team can really put pencil to paper as far as what’s changed in your employment, your career goals, your educational goals for your children (will they even go to an actual campus again?) and other areas of your life. Our conversation will change from market portfolios to actual life planning.
I also know that for some people, life is pretty much status quo because you’re an essential employee and your paycheck is stable. For you, this could be a great time to review your priorities and goals as well, while you’ve got some extra time at home.
Of course, I hope I’m wrong in my fear that a larger second wave of unemployment is coming. But none of us have lived through a pandemic like this before.
To wrap up, I know it can be fun and hip to have a financial planner when things are smooth. But the real value comes when times are tough, and the last thing you want to talk about is your financial life. But now is not the time to close your eyes and hide. If you’re feeling the effects of recent events and circumstances, put us at the top of your call list. I believe the most value we can offer is to be the team you can turn to – and the team you can refer your friends and family to – to help you through times like these.
Article by David Smyth, CLTC, Senior Partner at Family Financial Partners — a financial services firm in Lexington, Kentucky.