The last several weeks have been a very difficult time for us all. Our world has changed dramatically as fear pervades not just through the financial markets, but our everyday lives. Many of you, like me, are working from home. Some are going to jobs where you are risking exposure to the virus because your job is essential, and unfortunately for many, there is no longer a job or your business is looking at some lean times.
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So what financial moves should you be making now?
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While everyone’s situation is different, below are ideas could help you weather, and maybe benefit from what is going on.
First, talk to your financial advisor about your investment portfolio. If you don’t have an advisor, now may be the time to get professional advice. Make sure your portfolio reflects any changes that have happened to you personally due to the crisis. Your income needs, risk tolerance, and goals may have changed and your advisor should know that. There may be opportunities you could capitalize on, as well as risks to avoid.
If you are getting advice from the talking heads on TV, just remember they have no skin in the game. They are not responsible for what happens in your portfolio. They are not giving advice tailored to your situation.
Focus on Income
If your income is being adversely affected by what is going on, look to other income sources and be hesitant to make large financial decisions that will have repercussions down the road. We do not know how this will play out.
If you do need cash to get yourself across the crisis, look to borrow. If you have a home equity line, I suggest maxing it out and depositing the money in a different financial institution than you have the line with. The downside is you may have to pay some interest. The upside is if you need the money, you will have it. At a moment’s notice, financial institutions may reduce or even cancel your credit line. I would do this regardless of whether you need the money personally.
In 2008 and 2009, I saw people bailing out friends and family members, sometimes at great financial cost to themselves. I am not advocating bailing people out, but if you do, it will be much better if you are not creating a ripple effect in your own finances. And do not underestimate the amount of pressure you might be put under. I am already seeing clients being asked by friends and family for money. This will only increase.
Personal and Business Tax Efficiencies
Do not forget about taxes. For many, taxes are the single largest expense. Looking at ways to reduce your tax burden to keep more of your own money could be a way to ride out this pandemic without being dragged down by it financially.
For business owners, I would apply for credit from both your bank and the government programs like the SBA. If you end up not needing the money, your downside of paying interest is way less than the upside to keep the doors open and even potentially capitalize on opportunities that may present themselves. And it is way easier to get the money before you need it. Do not wait, act now.
I also would not lay people off. While we don’t know what the government will do, there is in proposed legislation loan forgiveness for not laying people off. You should consider for the short term, at least, reducing hours or reducing salaries instead of layoffs.
Lastly, I have a suggestion outside of finance. Exercise if your health allows. While the gym may not be an option, you should continue or start exercising inside your home, specifically, cardio. Get your heart rate up and sweat. Go find an exercise routine on YouTube. There are important benefits to you psychologically and regular exercise aids in the health of your immune system.
About the Author
Larry Steinberg is a financial adviser with Financial Architects in Pasadena, CA. He is a registered representative of Cabin Securities, member FINRA and SIPC and an Investment Advisory Representative of Claraphi Advisory Network, LLC, (“Claraphi”) an SEC-Registered Investment Adviser. Claraphi is not affiliated with Financial Architects or Cabin Securities.