retirement

Building Wealth as Parents During Uncertain Times

Parents have a lot weighing on their minds right now. Here are three truths they can rely upon, and three ways to shore up their finances during this time.

What we are seeing is unprecedented. Even though we crave physical touch and connection, social distancing and self-quarantining are recommended. Gatherings are limited to 10 people or less. The number of confirmed COVID-19 cases and deaths climbs daily. International air travel is restricted, and domestic air travel may be next.

I am scared just like you, because I don’t know what the future holds. We do not know when our children can safely resume school. Preschool may be open now but closed within a few days.

Virtual school appears to be a great solution, except when both parents work outside the home in essential industries. In some cases, the only responsible adults to oversee young children are the same adults most susceptible to this virus — grandparents with pre-existing health conditions.

What if the stock market continues to fall? What happens when you are furloughed simply because you are employed in one of the “nonessential” industries?

There are a lot of questions and very few answers. Anyone who tells you they can perfectly predict the future is lying.

Rather than getting caught up in the uncertainty, please lean into three truths:

1. You cannot control what happens, but you can control your reaction to new data

You turn on the news and are bombarded with pessimistic messages. Information overload is a real threat. Once you have basic facts, intentionally shut out the rest of the noise.

Money is only one form of wealth. Now more than ever, you need to stay emotionally and physically healthy. Self-care is paramount. Eating a balanced diet, exercising and talking to a confidant will help you process information in a healthy way.

Engage in an activity that relaxes you when feeling stressed and anxious. Reading, taking a bath, baking, meditating and journaling can all be done from the comfort of your home. You also have the ability to connect with friends and family through phone, text, or video chat.

2. Routines will help you keep your sanity

Before the Coronavirus threatened your way of life, you likely followed a schedule:

a. Wake up.

b. Exercise, shower and eat breakfast.

c. Get kids ready for school.

d. Drop kids off at school.

e. Work and take a lunch break.

f. Pick up kids from school.

g. Cook dinner or eat out.

h. Start the kids’ bedtime routine.

i. Relax and wind down.

Now you may be eating all meals from home and avoiding the school drop-offs and pick-ups. Nonetheless, you can still largely follow this routine. You simply have to be more creative in crossing everything off the to-do list. Additionally, be more flexible on the time of day that something is done. You will prioritize things that are important and leave the unnecessary items for another time. If no one in your household is sick, take this opportunity to come closer together as a family. Laugh more, play games, watch movies and have fun!

3. Short-term approaches will fail you

Recall the last major economic crisis in 2008. It felt awful, right? But it is also a distant memory. As time passed, you regained confidence that everything would be all right.

We are in uncharted territory, feeling under attack both physically and financially. The fight or flight response you feel on days when the stock market plunges is real, and the amygdala in your brain wants to do something about it. Hearing “stay the course” or “remain calm” provides little comfort. Approximately 80% of our financial decision-making is based on emotions, and the other 20% is based on logic. My job as a financial adviser is to help you focus on that 20% piece.

If you follow the stock market closely, it’s a true roller-coaster ride. 2019 was a banner year in the stock market with the S&P 500 Index returning over 30%. More recently, we experienced one of the sharpest, quickest market declines in U.S. history.

This crisis may get worse before it gets better. But this is a short-term perspective. Instead, let’s look five years out.

Do you believe there will be a vaccine to prevent the spread of coronavirus?

Will the global economy be back on solid footing?

If you answered YES to both of these questions, consider the opportunities available today to increase financial wealth:

4. Assess your cash reserves

Do you have enough cash on hand to cover at least three months of expenses? If you are currently employed, take a hard look at the industry in which you are employed and how vital you are to the organization.

Airlines, hotels, car rental companies, event spaces and restaurants are especially struggling. Vendors whose major customers are in these industries may also experience a big business disruption. If you are in one of these industries (directly or in an ancillary capacity), there’s a good chance that your work hours or pay could be reduced if the coronavirus threat persists throughout the summer.

Stockpile cash if your job is still intact and your emergency fund reserves currently are not where you’d like them to be. This does not mean that you should take long-term retirement funds and move to cash. Rather, pull out your budget and identify discretionary cuts you can make to save more of your after-tax pay.

5. Find a bargain with equities

For long-term investors who stayed invested over the last month, your portfolio is likely lopsided. You probably have lower equity and higher fixed income exposure than your long-term target. This is the perfect time to rebalance. Why pay $15 for a steak when you can get it on sale for $10? In this example, equities are steaks.

6. Take advantage of historically low interest rates

Do you have an above-average credit score and a good amount of home equity? Investigate a mortgage refinance if you currently have a high fixed mortgage rate or interest-only adjustable rate mortgage that will reset within the next few years.

Burdened by student loan debt? President Trump recently announced that interest on federal student loans (not private loans) will be forgiven for 60 days. Similar to a mortgage, private student loan rates are attractive today and also present a nice opportunity for refinancing.

Not all hope is lost. Although we face one uncertainty after another, there are silver linings … if you dare to look.

About the Author

Deborah L. Meyer, CPA/PFS, CFP®

CEO, WorthyNest LLC

Deborah L. Meyer, CFP®, CPA/PFS, CEPA and AFCPE® Member, is the award-winning author of Redefining Family Wealth: A Parent’s Guide to Purposeful Living. Deb is the CEO of WorthyNest®, a fee-only, fiduciary wealth management firm that helps Christian parents and Christian entrepreneurs across the U.S. integrate faith and family into financial decision-making. She also provides accounting, exit planning and tax strategies to family-owned businesses through SV CPA Services

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