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How to Protect Your Finances During COVID-19 Outbreak


The economy is definitely on the rocks right now. Being fearful is understandable and I’d be lying if I said this whole thing hasn’t caused me some anxiety, because it has. It still does to be frank. But the good news is I do believe there are a lot of reasons to be grateful and hopeful right now, even if it may be hard to see at this exact moment.


For me it's important and worth noting that everyone is feeling the economic pressures and that you are not alone. I've heard a lot of people talk about how they are feeling like failures now because they are struggling to provide for their families and that blame themselves that their financial futures are uncertain. Let me be clear, you are not a failure if you find yourself in this position. Your net worth is not your self worth. Our society has many systems and structures put into place that are working against everyone but the top 1%. That is not your fault and not a reflection of you at all.


Photo Credit: Christina Roy


For me, the good news is that the need for financial support is pretty darn universal right now. Oddly enough, knowing that is what makes this less stressful for me because the vast majority of people recognize that we are truly all in this together and are working together to develop innovative solutions to solve these complex problems. We may never see this opportunity again in our lifetimes, so it's important we don't squander it. Call me naive for looking at it this way, but I do. I see a lot of hope.


Signs of support are popping up already in unexpected ways:

  • In New York State they have frozen evictions entirely, they are looking at ways to give mortgage payment relief during this time to those who have major financial challenges due to the pandemic.

  • The government has developed some sort of stimulus package (albiet debatable who will actually benefit from it the most), but some people are going to receive some money as opposed to none.

  • On a much more local level I see small businesses getting creative and thinking outside the box to deliver their products or services in a new way (For example: breweries brewing hand sanitizer now, free rolls of toilet paper with your take-out order?!? I mean, yasss, honey!)

  • I even see giant corporations stepping up to provide pay for workers in ways they have never done so in the past. I’m talking about arguably giant evil corporations, exactly who you would least expect it from at all, reworking their policies to offer at least something...

  • Unemployment has expanded the eligibility criteria and reduced some limiting restrictions, thus increasing those who are qualified to apply, which is something.


While there could always be more done (Denmark, I'm tipping my hat to you right now with how your government is handling this and paying citizens to stay home and not work!) there are just so many signs that yes, this will be difficult, but as a society we will figure out ways to get through this together. And who knows? Maybe we will even finally be able to transform our economy in ways that will actually benefit us all.


With that being said, in America at least, we do tend to be an individualistic society. So it is only natural, based on our culture, that one should worry about himself or herself and one's own family during this time. I get it and you are not wrong for doing that. Even though this crisis is exposing the extreme level of inequity in our system and structures, there are things you and I can do to take care of ourselves a little better right now so we can then in turn take better care of others.


Photo Credit: Mackenzie Grate


Disclaimer*- Here are some of my thoughts and suggestions right now. However, as this situation evolves, I’m sure my ideas will evolve with it as well. Remember though, as an investor, you do the best with what information you have at any given point but you push yourself to continue learning more. As your assessment of the situation evolves, your ideas for tackling complex challenges and grows and evolves too. That is the defining skill that will always allow you to be able to take care of yourself: your ability to adapt and grow as things change.


So for what it is worth, here’s my current plan:


  1. Revisit my expenditures: I’m going through all the costs I have and completely reevaluating my monthly budget. Some costs have gone up (electricity, food, etc.) while others have gone down (gas, tolls, entertainment, etc.) My goal is to get a real sense of what this new "quarantine lifestyle" is going to cost me for the next few months at a minimum. For more tips on how to do a self-evaluation on where you are at financially, check out my previous blog post: How Do I Invest in Real Estate with Little Money: Tough Love: Getting your Money Right to Invest.

  2. Recalculate my net worth: This was painful. Very painful. To see how hard I have worked to build it up and just like that, overnight to see a significant drop in it. It hurt and required a stout drink after, but I got through it. I’m glad I did it though because I needed to see the reality of the situation for what it is. It created a new sense of urgency within me to reexamine my finances. If I had put it off further, I might have kept the illusion going and felt a little bit more comfortable for while longer than I should have. If I did that, I most certainly would have kept spending at a higher rate than what I really should be spending now. Also, the longer I put it off, the more significant the drop would have been and therefore even more painful. Despite the economy plummeting, I will continue to implement the same good habits as I did before (regularly calculating my net worth, maxing out my 401K, etc.) because I know it will continue to serve me well, especially right now.

  3. Reassess my values and rework my spending. This was tough. Being a really frugal person, my instinct is to cut down on everything entirely and stop the hemorrhaging as evidenced by my previous blog post: Creative Ways to Make Extra Money by Getting Most Things for Free, Really. But this is a very different situation. I am in a more comfortable place than most and I am fortunate (as of now) to have my job and be able to work from home. I am also fortunate to have an emergency fund built up which takes a bit of pressure off me for now. But that doesn't mean I am in the clear. I feel this dual responsibly in my life to be mindful of my spending and reduce it as much as possible, but also support the small businesses that I care about who are really struggling now.


Photo Credit: Alice Pasqual


With that being said, the only way I got to this place in my life was by being frugal and making sacrifices for years and years. I can’t just forget those habits and how well they have served me previously. Those are the same habits that will get me through this difficult time. So I went through and set a few ground rules for myself and my spending based on some hard soul searching and self-analysis:


  • Rule #1: If I have to buy something, I will only buy from a small and, ideally, local businesses if I can. Those are the real people I care about and I can be certain my money will go directly to people, not a CEO's bonus check.

  • Rule #2: If I have to get something from a chain store as a last resort, then it has to be from one that is providing paid time off for workers, period. If not, it's a deal breaker for me.

  • Rule #3: I’m only buying necessities for now because anything that is not a necessity is slowing down the ability to get essentials shipped to others and delivered in a timely manner. I know the flood will die down, but I'll wait until it does. And perhaps by then, I won't want what I was thinking of buying on a whim (a 9000 piece puzzle, smh).


Photo Credit: Pricilla Du Preez


So yes, I am reinventing how I spend now to continue to be as frugal as possible, but open to paying a little bit more in certain areas if it means supporting local small businesses and people I love.


So investment wise, people are afraid to do anything right now, which I understand. That's the hardest part about investing is the uncertainty, especially when the market is so volatile. And then there is of course the painful psychological effects of loss aversion, which is real and scientifically proven. We as humans feel significantly more pain when we feel like we "lose" something than joy when we feel like we "gain" something. Right now is when we feel this psychological torture the most.


Whatever you do, do not sell your stocks right now. If you do, you will regret it. The market will come back and it may take years, but if you pull out now, all you will ever have is a loss. Then you will feel burned by it and never want to invest again. You may resort to stuffing cash into a mattress like our grandparents did thinking it will be safer there. It will not. And it most certainly won't grow that way. If you do nothing else: do not sell your stocks right now while you are down. If you aren't brave enough to buy while things are on "sale" then please do nothing and just hold tight.


Here are some steps I am taking investment wise right now. They're scary, but important to do:


  1. Reassess my major financial responsibilities as a landlord. People have a misconception that landlords are all rich and evil. Some are, but many aren’t. A lot are just individuals, like myself, who are trying our best to use it as a means to being able to provide for ourselves and our future. With that being said, I recognize one of the ways I can help right now is by ensuring my tenants aren’t afraid of losing their home. My tenant was slated to move out at the end of this month and we were going to redo the property. The only right thing to do right now is to reach out to the tenant and see what is best for her. Maybe she needs to stay longer? Maybe she still wants to go? Either way I need to be flexible and accommodating because it is about people right now, not numbers.

  2. Use this time to continue working and shifting my personal plans. It’s no secret that before all this started I was working towards leaving the my job and venturing out on my own. I still know that is what I ultimately want to do but I am also so grateful that the timing has worked out and I haven’t done that yet. In some weird way the universe was looking out for me there? With that being said I want to use this time to continue to network with entrepreneurs, and build the foundation for my business. We are definitely in unprecedented times, but I also know from a historical perspective, those individuals who recognize opportunities and seize them at moments like this (when most others are afraid to) that they are the ones who are able to fulfill their dreams and come out ahead. So I’m going to focus most of my energy on figuring out that that looks like for me. And I'm going to continue to hustle on the side, now more motivated than ever to be able to provide for myself.

  3. Lastly, I AM BUYING STOCKS. I know. I know. You think I’m crazy...and I am. But I plan to take every extra dollar I have and split it 50/50. 50% for savings and 50% for investing in stocks. The market will bounce back eventually and I am not investing any dollars I need right now or in the foreseeable future. This is only money that comes to me unexpectedly or that I really just don’t need right now. I need to do this for my future, the future of my loved ones and for the future of the economy. Any money I put into it, I’m treating it like feeding money into a slot machine. I never expect it to come back to me. But maybe, just maybe I'll hit the jackpot one day and get a row of 7's.


Photo Credit: Enzo Boulard


I hope this helps. I definitely don't have all the answers, and to be honest, no one ever does. You work the best with what information you have and you keep learning more as you go. If you ever want advice or have suggestions, I always love to hear from you. We are in this together and will come back stronger than ever. I truly believe that!


Forever grateful,

Mack

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