CORONAVIRUS, MONEY, AND FAMILY—MOVES TO MAKE NOW

I woke up sweating and afraid.

All night long, I had had bad dreams about the Novel Coronavirus (COVID-19) and the threat to my family. It happened right after a health scare on our trip overseas a month and a half ago. So, I guess bad dreams should not have been a surprise. However, for millions of Americans, that nightmare may just come true.

The situation is one more reminder that ultimately, money does not matter–especially during a health crisis. Your family matters. However, amid the uncertainty, you have to be sure that your money affords you every advantage to remain well or deal with illness if it comes.

So, what actions can you take?

Well, let’s look at that and explore the whole situation further to see how proper management of your finances can be a help during the crisis, and what to expect in the future.

OUR STORY

We had a real scare.

We were fresh off a three-week trip from India. But upon return, we found a world to be a mess because of Coronavirus (COVID-19). Financial markets were in a panic, and down about twelve percent in just a week. The virus had spread vigorously outside China and had just shown some “community spread” characteristics. Moreover, deaths were moving toward 3,000 worldwide—a figure as I write this that seems impossibly small considering the subsequent wreckage to Spain, Italy, and the US.

But that was not all. Shortly after our return, we got sick. Really sick.

You see, at the tail end of our trip, we began to contract some severe flu-like symptoms, similar to COVID19. They blossomed on our flight home and became even worse after our arrival back.

Typically, illnesses on trips just happen from time to time and are part of what you can expect. But these symptoms arose about two weeks after we had a layover in Singapore, which had been a hot spot for COVID-19 early in the epidemic until they stopped accepting passengers to or from China. So that two-week period was the approximate amount of time for the incubation of the virus.

After self-isolation upon return, we finally got reassuring confirmation of the results we expected—we had Influenza A, not the coronavirus. Whew!

Of course, we still felt like crap and only have started feeling well in the last few weeks.  Nothing like a little panic to make it real.

Since that time, we have been on lockdown.

PREPARING FOR COVID-19 NOW

So, what do the experts recommend to be ready for virus impact over the next few months? The best advice comes from the Surgeon General:

• Stay home if you are sick

• Avoid contact with those who are sick

• Wash your hands frequently and maintain proper hygiene

• Wear a facemask when you are outside

• Maintain adequate supplies of food and other items at home for use during the lockdown

In other words, use some common sense.

For us, part of that common sense includes the whole notion of staying healthy and adopting a healthy lifestyle. After all, both of us have some risk factors if COVID-19 comes knocking. So, we are doing some long-overdue things—cutting down on sugar intake, dropping weight (about 6 lbs so far), and getting more exercise, even when we are inside. The point: the disease preys upon people who are older and with specific medical conditions. I cannot do anything about the former, but the latter is being addressed.

Besides, isn’t it a good idea to maintain good health habits?

SOME POSSIBLE TIMELINES FOR PROGRESS AGAINST COVID-I9

There is a lot of uncertainty. For example, no one can predict the pace of disease spread. That uncertainty has implications for you and your finances too. However, based on several news sources, we do know the rough timelines at which potential progress against the disease may be made. I have assumed that the approvals of new treatments would be expedited:

• Testing—there are now tests that give rapid results within 10-15 minutes. Hopefully, these will be in widespread use soon.

• New medications—probably 2 to 9 months. Some anti-viral drugs are being tested now, and more will be tested in the future. For instance, Remdesivir has been called out by the World Health Organization as promising—but more testing is needed. Moreover, companies around the world are researching at frantic rates to help find other medicines. Hopefully, one or more will be available soon for those who are affected.

• Vaccines—9-18 months. Yes, this takes a long time, but it is par for the course to make sure that a potential vaccine is safe and effective. Don’t expect this before 2021, but by January of next year, some of the ones that are promising may see limited use.

SOME IMPACTS

So, what does all this mean for you and your money? Nothing good. Here are the reasons:

Lockdown—at this writing, 96% of the country is in lockdown. While those who can work from home are doing well, many people are unemployed. The number of unemployed people might reach as high as 30 percent for a time.

Supply chain disruption—many companies have cut earnings guidance based on a lack of capacity in areas that supply them.

Time lost because of illness—the more people who get sick from the disease, the more time they will spend at home or the hospital and off the job. That, in turn, makes the economy less efficient

Slowdown in demand–people curb their spending. For instance, gasoline demand has dried up because few are driving.

Jeremy Siegel, a professor at the Wharton School of Business, had studied the period after the first World War when a similar pandemic occurred. He came to the conclusion that because of the path of vaccine development (above) and general financial trends, that 2020 is likely to be rough, but that the economy may rebound sharply in 2021-22. You can read about that here.

Who knows whether he is right? But his assumptions seem generally sound to me. Of course, if he is correct, the rest of 2020 will be very tough.

REASONABLE ACTIONS

Here is a checklist of potential actions you might take:

• Stay informed about Federal programs–especially if you have been laid off. You can read about some of the ones for business here and individuals here.

• Watch the Federal Reserve and Federal Government–another round of stimulus or help seems likely. It is not clear what form that assistance will take.

• Reduce leverage and don’t attempt new borrowing—of course, it all depends on your situation. That is what financial advisors are for, and if you are thinking about taking on new debt, it is wise to talk to one first. However, during periods of uncertainty, most people opt for caution.

• Refinance and use the lower rates to reduce your current loan payments—we are trying to do this on our rental properties—so far, without success. Interest rates on the ten year Treasury bill are the lowest in history. That translates to some of the lowest mortgage rates I have ever seen.

• Keep long term assets long—if you are not going to need money soon, such as in 401k and IRA accounts, Warren Buffett recommends investing for the long term and ignoring short term price movements. (Of course, he has $120 billion in the bank).

• Keep adequate reserves—you never know what can go wrong during periods of uncertainty like this. At the very least, consider putting off large new purchases, especially if you have to go further into debt.

• Avoid losing money—see the link to this interesting article. In our case, things are working out reasonably well. I wish I could say that all of our investments are going swimmingly. However, they have lost significantly less than the Standard and Poor’s 500. That is because we have a high percentage invested in cash and cash equivalents. I began to think stock values were stretched at the beginning of the year, so I became more liquid at that point. Still saying that you lost less than others is not much of a “victory.” Acting less ignorant than others is not much to brag about.

• Think high-quality investments—this includes investing in companies with strong balance sheets, solid financials, etc. Many people invest in government-issued bonds for safety. In other words, in an uncertain world, these sorts of solid investments are less affected than speculative ones.

For instance, I have concentrated on companies with significant cash on hand that might benefit from the trend of doing business online with stocks such as MSFT, CSCO, AMZN, and AAPL. Again, talk to a financial planner to see if similar actions are in your best interest, or if you need a different strategy altogether.

IS THERE ANY GOOD NEWS ABOUT THE VIRUS?

Maybe. But there is a lot we will not know until several more months have passed. We can hope, for instance, that if the virus is like some other flu-like diseases and that we will get a breather over summer as the virus infects fewer people. And some have theorized that the death statistics may not be as bad as feared.

And who knows? Professor Siegel may be right in predicting that the financial situation will clear up by the end of the year.

CONCLUSION

It is not time to panic. However, it is time to act to prepare yourself and your finances. So get started, and strongly consider using a fee-only financial planner to give you some objective advice about your money if you have not already done so.

In the meantime, if you have health risk factors that can be exploited by COVID-19, take steps to improve your health if you can.

Disclaimer: consult with a financial professional before taking any steps outlined here. Not all advice may be suitable for your circumstances or investment style.

Photo attribution:  Agência Brasil , “Washing hands”

License:  Creative Commons Attribution 3.0 Brazil License