When the world began learning about a novel coronavirus, soon to be called Covid-19, it was difficult to imagine the magnitude or rapidity of the spread and effect this virus would have on just about every aspect of our lives. Suddenly, families were being told to stay home, practice social distancing, clean everything, wear masks in public. Confusion, stress, and fear have become the collective challenges to try to tame as we move as communities to help each other, find balance and stay safe.
In my role as a mother, I have spent extra hours stocking the pantry, wiping down surfaces, planting a vegetable garden and filling up our medicine cabinet with all the nutritional and herbal remedies I know to help my family build our immune systems, combat stress, get good sleep and fight off illness should it strike. These activities help me maintain a small sense of control in a time of intense uncertainty.
In my role as a financial planner, I find myself working with clients to do the same thing: focus on what you can control. If you have a loss of income, it is time to look closely at your spending and keep it to the bare minimum. Hopefully you have that emergency fund we have discussed since we first met and this will help see you through. Are there additional sources of funding available to you? Do you qualify for unemployment or for the Paycheck Protection Program for small businesses? If you still have your job and are lucky enough to be able to work remotely, it is still a great time to study your spending and shore up your savings. A Pandemic is a perfect tutor in the value of the safe, boring, liquid emergency fund!
Turning to investments, panic may have tempted some to sell as markets turned volatile. Hopefully that temptation gave way to sense as you remembered that you have a long term plan that is not well served by short term panic. This is a good time to revisit your goals and time horizon as well as your gut level tolerance for risk. If something needs to be adjusted, do it carefully, ideally with guidance from a trusted advisor. If you are near or in retirement, it is always a good idea to know where your next year of funding is coming from, at the least. This should be safe and give you a sense of security. If you have a longer time before retirement and you have some extra cash, this could be a good time to add to your investment portfolio, taking advantage of the current volatility to “buy low”. This is only a good idea, however if you have a clear investing plan and a solid emergency fund safely tucked away!
Taxes are always an interesting topic for me and now is no exception. The CARES Act has created some new opportunities for some that can have a beneficial tax outcome. Low income years can be a chance to make certain tax advantaged financial moves, such as Roth conversions or capital gains harvesting. Even losses can have a silver lining when viewed with the tax lens on.
It is impossible not to think of the unthinkable during a time like this. If you have not done it already, review or create an Estate Plan. This can mean different things for different people. It all depends on who and what you have to protect. If you have young children, do you have formal guardianship provisions in place? If you have young adult children, do they have powers of attorney for health and financial matters that would let you step in and make decisions for them if necessary? Do you have these things in place for yourself. The Covid-19 Pandemic will one day pass, but at this time when so many thoughts turn to life, death, health and safety, take the time to make sure you have done all you can to protect and care for those you love.
Jennipher Lommen is a Certified Financial Planner TM and Enrolled Agent who offers comprehensive financial planning advice to clients in Santa Cruz, CA and beyond.
