What if the World Melts?

There's a lot of talk about the impending doom of America. Everyone has an opinion, and most people's opinions revolve around some notion of our economic system collapsing. Whether it's the housing market, our currency, the stock market, or some other piece of our economy, people think it's all going to melt. 

Do I think our world is perfectly put together and predestined for a long and rosy path? Absolutely not. In fact, I think we have some pain ahead of us. Companies are starting to lay people off. Interest rates and stubbornly high house prices are limiting housing affordability. Rampant inflation (particularly for food and gas) is squeezing away families' remaining financial margin. Consumer debt has surpassed all-time highs. And to put a cherry on top, Federal student loan payments are set to resume on 10/1. All of this is a recipe for tough times. 

So what do we do about it? First, I'll inventory the crappy advice I'm hearing all around me:

• Sell all of your stock investments.

• Buy gold.

• Buy real estate (regardless of its price and affordability).

• Apply for HELOCs, credit cards, and other forms of debt.

• Buy crypto

All of this is advice being pedaled by so-called experts. Well, they are experts, actually. They are experts at what they are experts in (i.e., not finances), but then talk about these topics, and their credibility transfers with it. My wife regularly shares ideas she hears from very smart people she follows online and in the media. Brilliant people in their own right. They should be listened to when it comes to their areas of expertise. Then, however, they start spouting opinions about these other things....and people just blindly believe them. 

I'm not suggesting you should listen to me, though. I'll let you decide for yourself. If you do decide to heed my advice, here are a few simple things we can each do to prepare for what's probably a rough road ahead:

• Get intentional. Make a plan each month, then execute it. Know what you'll do, do it, and know you did it. Budgeting.....the dreaded b-word.

• Make sure your investments are simple and straight-forward. Invest broadly and cheaply. I'm a big fan of total stock market index funds. With a few clicks of the mouse, you can own one fund, with 500-4,000 different companies, with almost zero fees. 

• Once your investments are locked in, don't touch them....ever. Don't let fear get the best of you. In the 155-year history of our stock market, there's never been a 15-year window where the market lost money....ever. 

• Make sure you have an emergency fund. Set some money aside in a savings account. Use it only for real emergencies. 

• Serve and give to people in need. Generosity always wins. 

• Surround yourself with encouraging people. 

• Live a meaningful life. If we let it, there's always something to scare us and keep us awake at night. Block it out and make the best of each day.

We'll get through it!

"I Lost My Job....Now What?"

Amidst all the Coronavirus memes, toilet paper rantings, and day-in-day-out inconveniences of the self-quarantine, there are a lot of people struggling financially. Millions upon millions of Americans are losing their jobs. Regardless of what you think about the seriousness of COVID-19, the media’s portrayal of it, or our government’ handling of it, the reality is people are hurting. Some medically, some financially, and some both.

A few weeks ago, as we were just starting to experience the front end of this thing, I wrote a piece called “Prepare, Hope.” In it, I laid out five things all of us need to do in order to navigate these rough waters, financially speaking. In case you don’t want to read it, here’s the cliff notes version: leave your investments alone, make sure you have a healthy emergency fund, don’t make any major financial decisions, make sure everyone in your household is covered by health insurance, and don’t stop your generosity.

Those five pieces of advice are just as relevant today as they were a few weeks ago when I first wrote about them. However, some of you are losing incomes and/or losing jobs. If that’s you, the five pieces of advice above simply aren’t good enough. You need more! So if you’re asking “I lost my job….now what?”, here are some practical next steps to give yourself an opportunity to bridge the gap between this negative situation and your brighter tomorrow:

Get rid of the guilt

Losing a job can be utterly demoralizing. It makes us feel like a failure and strips us of a piece of our identity. We walk around through life feeling like we’re making the right decisions and have some sense of security, until it’s all stripped from us. Please don’t beat yourself up over this, unless you successfully predicted a guy in China would eat a bat that would cause a global pandemic, essentially destroying the travel, tourism, entertainment, and food/beverage industries overnight, all the while reducing demand for most products and services to zero while the world self-quarantines. If you saw all that coming, then yes you should be beating yourself up. If you didn’t, then you’re human just like the rest of us. As I often say, we can only control what we can control. Unfortunately, we can’t control the gut-wrenching decisions our employers have to make. Hear me out: this isn’t your fault! I know people who were absolutely crushing it in their careers two weeks ago…..and now don’t have a job. If you feel guilt, or regret, or blame for your Coronavirus-induced job loss, please work through it and get to a place where you acknowledge there’s nothing you could have done differently.

File for Unemployment

“Unemployment” feels like a four-letter word to a lot of people. It feels like a hand-out. It feels like cheating. Please hear me: it’s not! This is what the program was designed for. This is why employers pay a tax specifically for this. It’s meant to protect people who lose their job. Don’t think of it as a hand-out, but rather a hand-up. We need to humble ourselves to do what’s best for our family, and for most of us that means immediately filing for unemployment as soon as we lose our job. A lot of people are asking the question “do I even qualify for unemployment?” Here’s my advice: just apply! So many people are sharing false information, half-baked knowledge, and bad assumptions. The best way to know if you qualify for unemployment is to apply for unemployment. Each industry and each job has its own unique set of circumstances. Also consider there is new legislation being discussed and negotiated all the time. Just apply! The worst they can do is tell you “no.” If you lose your income, immediately file for unemployment and figure out what benefits you are eligible to receive.

Contact your landlord or lender

If you’ve lost a meaningful amount of income as a result of this pandemic, reach out to your landlord (if you rent) or your lender (if you own) and ask for relief. Most lenders are showing a lot of grace and mercy to their borrowers. They don’t want to kick you out of your house any more than you want to be kicked out. Call them and just be honest. Be humble and don’t go into the conversation expecting anything. Be grateful and courteous. A common outcome for these situations is lenders waiving 2-3 months of payments, and simply tacking them onto the end of the term. So they aren’t giving you a free pass…..just some temporary relief to get your financial life back on track.

Landlords are more hit-and-miss, as they too are typically subject to their lender’s decisions. But similar to lenders, landlords don’t want to evict you any more than you want to be evicted. Contact them as soon as possible, be humble and honest with them, and ask for some grace. Landlords, I implore you to step up and do what you can! This is your chance to play the role of the hero. Be the hero today and watch it come back around to you ten-fold after all this mess clears up. Show mercy and give whatever grace you can afford to financially stomach. We’re all in this together.

Contact your Federal student loan servicer

If you have Federal student loans and you lose income, immediately reach out to the company who services your loan (i.e. who you make your payments to) and ask for relief. All Federal student loan borrowers have the right to stop making payments through September 30th, 2020. If you haven’t lost any income, I don’t recommend you take this step…..it’s only delaying your eventual payoff (which I hope is soon!). However, if you’ve lost a meaningful amount of income and you’re feeling the financial stress, make the call and get these payment suspended through September. My tip of the cap goes to our Federal government for making this one happen! Thank you!

Cut back your budget

If you’ve lost income, it’s time to go on red-alert lockdown. Any spending that’s not absolutely necessary needs to stop. Food, transportation, and shelter. Everything else needs to go…..not forever, but for the season. You need to cut things back as far as you can to ease the pressure as much as possible. Hopefully you have an emergency fund available, in which case lowering your expenses will allow the emergency fund to last longer. Let’s say your monthly budget is $5,000 and your basic needs account for $3,000 of it. Let’s also say you have an emergency fund of $10,000. If you keep the same lifestyle, your emergency fund is enough to cover 2 months of living expenses. If you cut back to just the basic needs, your emergency fund can last you a bit more than 3 months. That extra month could make all the difference in the world!

Find near-term income

I know I’m probably playing the role of Captain Obvious here, but if we lose our job and we we don’t have a robust emergency fund to bridge the gap for several months, we need to quickly replace the lost income. Unemployment is a band-aid, not a cure. The cure is finding income that fills in the gap. Now this doesn’t need to be the job of your dreams. It just needs to be income. There’s a time and a place to find the job of your dreams, but right now the goal is to make it through all this pandemic mess. We need to have the utmost humility in this season of life. Grocery stores are hiring, big-box stores are hiring, delivery services are hiring. Start asking around in your social circles. Someone who knows someone in your circle is hiring. If you take the approach of “there are no jobs”, then you’re right…..there will be no jobs for you. However, if you take a proactive and positive approach, you will absolutely find work.

Re-assess what’s most important

Many of us have been working traditional jobs we don’t really enjoy because the world tells us we need something “secure”, and “safe”, and “reliable.” Whether we believe it or not, there’s no such thing as security. No job is secure, no job is safe, and no job is reliable. We’re all replaceable. I used to have a very “important”, high-profile job. I was extremely valuable to the organization and helped make them a lot of money. You know what happened when I left? They replaced me in two days and didn’t miss a beat. We are all replaceable. So here’s a question: if we truly understand no job is “secure”, or “safe”, or “reliable”, why are we making career decisions based around this false belief? If we finally come to terms with the fact there’s no such thing as security, that should free us up to pursue what we’re truly meant to do. What a liberating feeling!!

During this season of life, I beg you to explore what you’re truly meant to do in this life. You’ve already been forced out of your old career, so why not use this as an opportunity to reinvent yourself? We still need to find short-term income to get us through this mess, but we can also start to develop skills, relationships, and opportunities to propel ourselves into the next season of life so we can live it with purpose, with passion, and with meaning. I hope some of you join me in this pursuit, as there is nothing better. Let’s get through the scary, and move into the awesome. As with all terrible things, this too shall pass. The only question is what you’ll be doing after the clouds dissipate and the rough waters smooth out. For many of you, this new-found curse of unemployment will ultimately be the turning point in life. Many of you will look back and say it was the best thing to ever happen to you. I pray that for each and every one of you.

God bless each and every one of you. I’m sorry for what you’re going through, but also believe your future is better than your past. If there’s anything I can do to help, please don’t hesitate to reach out. We’re in this together!!!

Prepare, Hope

The last 24 hours have been surreal. The NCAA formally decided to host the NCAA Tournament without fans, the NBA suspended its season indefinitely, the World Health Organization officially declared COVID-19 a pandemic, and trading in the stock market was halted for the second time in a week. First and foremost, I’m not a doctor. I don’t even play one on TV. I’m over here in my little corner of the world trying to figure out how to navigate this situation for my family. As of right now, I don’t have clarity on that but have been actively seeking wise counsel from my friends in the medical world.

However, I do have a lot of insights and opinions as it relates to how we should be approaching our finances. I’ll let you decide how much value you want to attribute to them. These are my opinions and my opinions alone. If I were you, I’d strongly consider what I have to say, strongly consider what others have to say, and use the collective insights to make the best possible decisions for your family.

I have one overarching fear. We’ve had 11 years of up. 11 years of growth. 11 years of good. That’s an absurd amount of time to be on a winning streak. This unthinkable run does have consequences, though. Specifically, if you’re under the age of 35, you’ve never experienced what economic turmoil looks like first-hand. You’ve never felt the sharp pain of watching your investments evaporate into thin air, or lived through the fear of waking up every day wondering “will I still have a job by the end of the day?” You haven’t watched your peers, one-by-one, experience a financial collapse. You haven’t felt the harsh consequences of debt (and there’s a lot of debt!).

I don’t say all this to incite panic or worry. Rather, I want us to look at this issue directly in the eyes, prepare ourselves, and navigate the rough waters that are likely in store. As the saying goes, “Prepare for the worst, hope for the best.” That’s what we’ll do. With that being said, let’s dive in!

INVESTMENTS

As of this morning, the stock market (S&P 500) is down 25% in just over three weeks. Wow, that’s scary! However, let me frame it up a bit differently. After this huge 25% decrease, the stock market is sitting at values not seen since……well, February 2019. Yes, you read that correctly. We are sitting at the same place we were just over a year ago. We’re also double where we were before the last stock market crash and nearly 4x as high as we were at the bottom of the last recession. Perspective matters! In its 150-year history, the U.S. stock market has provided an average 9% return to its investors. That’s not a 9% return during the good times. That’s a 9% return through all the times, good and bad. That 9% includes two world wars, the assassination of a president, 9/11, the tech bubble burst, 29 recessions, and countless other tragedies. The point: our country’s stock market is resilient, and over a long period of time (15+ years), poses far less risk than most believe. In fact, if you’ve put your money in the stock market and left it for 15 years at any point in the last 150 years, you’ve NEVER lost money. There are a few instances of losses over a 10-year period, but the stock market has never lost money over a 15-year period.

So what does that mean for you? What decisions should you make in light of today’s crazy situation? In short, nothing. Assuming you’re invested in diverse, low-cost, stock index funds, you should do absolutely nothing. Stay the course! If you’re currently making periodic investments into these same index funds, whether its via paycheck deductions into a 401(k)/403(b), or by you manually investing into IRAs or taxable accounts, continue to do it. Stay the course! It feels yucky at the moment, but in the long run you will be so grateful you stuck to the plan.

EMERGENCY FUND

There is so much uncertainty in our global economy right now. China is isolated from the world. Italy just went into total shutdown mode. Airlines are shutting down portions of their fleet. Public events (large and small) are being canceled altogether. So many weird things. The system is being stressed right now, and it’s hard to tell how it all plays out. One thing is for sure, this amount of stress is going to result in some casualties. Some companies will go under, some jobs will be cut, and overall business activity will slow as COVID-19 becomes a more tangible reality in our communities. It would be irresponsible for me to make any specific predictions on who will be impacted and how, but the writing is on the wall that some people are going to be materially impacted, economically-speaking. I would also caution you to not look at the situation and say “I don’t work in the ‘insert name’ industry, so I won’t be impacted.” That’s short-sighted. If there’s this much stress on the system, we will all feel it. Let’s use the travel industry as an example. If people from the travel industry lose their jobs, they may not be able to make their rent/mortgage payments (negatively impacting landlords, financial institutions, and taxing authorities), they may not have a lot of money to buy things (hurting businesses in their community), and there will be more competition for available jobs (lower pay and more stress for prospective employees in other industries). Lots of possible ripple effects.

With that in mind, we would all be wise to make sure we have our emergency funds topped off during the season ahead. Having cash available could be the difference between paying the bills or not paying the bills. If you already have a healthy emergency fund (say 3-6 months of expenses), awesome! Make sure that cash stays available for immediate withdrawal. If you have the ability to increase your emergency fund in the near-term, you may want to do that as well. If you’re actively paying off debt (awesome, by the way!), you may want to push pause on that effort and instead place that money into your emergency fund. You may want to trim back some of the extras in your budget to find additional cash for your emergency fund. I would NOT advise anyone to sell stock index fund investments in order to raise cash for their emergency fund. If at all possible, please leave that money alone. We don’t want to voluntarily sell those investments in the middle of a 25% decline. Hopefully you never need to use any of this cash, but it will be there for you in the event rough waters do hit your family. When all the smoke clears and you’ve successfully navigated this mess, then that money will still be available to do whatever you were previously going to do with it (pay off debt, go on that trip, replace your car, etc.).

MAJOR DECISIONS

I’ll say this very clearly……this is NOT a good time to be making major financial decisions. If you’re thinking about buying a home, purchasing a new car, retiring imminently, or taking any other action that results in a material change to your finances, I simply wouldn’t do it. These are all great things, and I want them to happen for you, but I don’t want them to turn your life into a nightmare. My best advice is to be patient, let this season pass, and then make these awesome decisions with more clarity, full confidence, and less fear. Some of you might be thinking “well I can get a great deal if I act now.” These are also the same people I mentioned above that weren’t old enough to live through the Great Financial Crisis. Today, in this moment, some major decisions can make sense. But what happens tomorrow or next week when your world gets unsuspectedly turned upside-down? This is when fear sets in and we start to snowball bad decision after bad decision. Please don’t put yourself at risk for something like this. If you have house or car fever today, it may be time to take a cold shower. Those houses and cars will still be there for you when all this calms down, and probably at a really good price!

HEALTH INSURANCE

As I reiterate often with my clients, not having health insurance is never an option. This was true 10 years ago, it was true yesterday, it is true today, and it will be true 10 years from now. Without health insurance, we are one bad day away from absolute financial ruin. Please don’t allow yourself to be unnecessarily vulnerable to this risk, especially when the issue at hand is a global pandemic! If you’re 26 or younger and on your parents’ health insurance plan, great! If you have health insurance through your employer, great! If you’re uninsured today, not so great! If that’s you, one of the most affordable and efficient options is a health sharing program. I’m a big believer in these programs and actually use one myself. My family uses Medi-Share and I can’t say enough good things about them. Here’s an article that explains what health sharing programs are, and it even compares a few of the larger programs. I’m not affiliated with this blog, but I think you’ll find this information useful. We don’t need the Rolls Royce of health insurance plans, but we do need something. Look at it like auto insurance. We don’t rely on our auto insurance to pay for our oil changes, or brake pads, or alternators. No, we rely on our auto insurance to protect our financial life when we wrap our car around a light pole. It protects us against the really bad stuff. Our health insurance should be the same way. Find a plan that offers you enough protection that one bad day won’t blow up your life, but affordable enough for you to work it into your monthly budget.

GIVING

If you give generously, and I really hope you do, please do not let fear deter you from giving. Based on many of my words above, the need for joyful, generous givers may be more important in the months ahead than it has been for the last decade. There are people hurting and they will continue to need people like you and I to step in and show God’s love through our generosity. There are a lot of places in our financial life to cut back on, but I don’t think generosity should be one of them. The moment we stop giving (or materially pull back our giving) is the moment we start living in fear and making it all about us. If you’re a person of faith as I am, this is a great season to test your trust in God and his provision in your life. If we can be generous and selfless through a season of uncertainty and nervousness, just picture how much we can grow in our faith in the season ahead!

Those are my five key takeaways today. Stay the course on investing, keep as much cash in your emergency fund as possible, push pause on any major decisions, make sure you have health insurance, and keep being generous. If there are other topics or questions on your mind, please ask them in the comment section below. I will either address them in the comments, in a private exchange with you personally, or in a subsequent blog post. Lastly, please share this with people in your life so they too can get prepared for the season ahead. Now let’s go from here and make sure we’re taking care of our family! After all, money is never about money.

“Those are my five key takeaways today. Stay the course on investing, keep as much cash in your emergency fund as possible, push pause on any major decisions, make sure you have health insurance, and keep being generous.”