Facing Financial Firsts in the Wake Of COVID-19

My, how times have changed, and many of those changes have hit millennials especially hard. To adapt financially, many are doing things differently now, and finding that their stock options and company stock can play a role.

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Many millennials are now faced with new realities in the wake of the coronavirus pandemic. With one in five recently put out of work (opens in new tab), when it comes to finances there is a growing feeling of hopelessness for many.

These unprecedented times have led to many firsts for millennials, including changes to how they are investing, job changes, changing prospects for buying a home and — a big first for most — moves toward selling their stock compensation.

Investing Shifts

Investing, unfortunately, is often punctuated by fear, especially during a recession. A recent Think Advisor survey (opens in new tab) revealed heightened anxiety among millennials about investing during the pandemic. The survey found that this anxiety caused some to change their investment strategies, including “31% [who] moved to more conservative investments and cash and 15% [who] moved to more aggressive strategies.”

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However, while it may be scary during these uncertain times, try not to panic as you consider your investment strategy. It is important to create a plan. For individuals with company stock, creating a plan involves identifying how this stock ties into your overall risk tolerance. This plan will help evaluate how these investments connect to funding your other financial goals.

Emotionally, it’s easy to become attached to your investments, especially when it’s the stock of a company that has treated you well as an employee. But the more you detach yourself from the emotional aspect of investing, the easier it will be to rationally adjust your portfolio to fit your needs in the long term.

Changing jobs

ThinkAdvisor found that 60% of millennials have either lost their job or taken a pay cut (opens in new tab) due to the pandemic. As the economy slowly recovers from COVID-19 (opens in new tab) and job offers are accepted, decisions surrounding what kind of compensation benefits to set up follow. As part of the compensation package, many new hires are now offered stock options, restricted stock units or a combination of the two. Consider sitting down with a trusted adviser (opens in new tab) to look at your personal and professional goals and the company you are joining to compile possible scenarios over the next 10 years from as many angles as possible. This personalized advice will allow you to easily select the best compensation option.

Funding financial goals, like a home

Homeownership may remain out of reach for millennials (opens in new tab) in the coming years due to COVID-19 and the over 50 million Americans who filed for unemployment.

However, it is predicted (opens in new tab) that as housing prices continue to lower with the recession, the barrier to entry will also lower. It could become a prime market for millennials who have never purchased a home (opens in new tab).

When you need a down payment and the job market is unpredictable, it’s best to consider all your resources before making such a milestone purchase. Exercising and selling some stock options to fund a new home purchase has real tangible lifestyle benefits and corresponds with achieving a significant financial goal for many people.

Some people accumulate company stock options over their careers, be it through options, restricted stock awards or employee stock purchase plans. The equity grows with the company, and it’s easy to feel an emotional attachment to it. Even still, selling some of this stock to purchase a home offers tangible lifestyle benefits and can help you reach your homeownership goal.

Individual stock positions might have been better used as a piece of a diversified portfolio (opens in new tab) before the coronavirus. Now, with a recession looming, a very viable consideration is whether they may be a means to achieving your goals that have an entirely new value in the world of today.

What to do when you feel hopeless

Make a structured plan that accounts for both good and bad outcomes. It should include specific, measurable steps and deadlines.

It is important to be prepared for the worst, including job loss, losing money in the stock market and losing equity in your home. On the other hand, be prepared for the positive effects of recessions, like lower home prices, lower entry points to the stock market and a chance to reassess and find a better job.

As you get started, you may find you don’t know enough to make a plan on your own. A great approach to finding the answers to your questions is to sit down with a trusted adviser. Good advisers prepare you for the worst while providing practical tools to boost your chances of meeting your goals.

If you feel like the pandemic has thrust you into unknown financial territory and you're facing some financial firsts, use this time to re-evaluate your goals and plan ahead. With a good plan and a trusted adviser, you can learn to adapt during times of uncertainty.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

David Flores Wilson, CFP®, CFA
Managing Partner, Sincerus Advisory

David Flores Wilson, CFP®, CFA, CEPA is a Managing Partner at Sincerus Advisory (opens in new tab), a Registered Investment Adviser providing holistic, fee-only financial planning and wealth management services to families and individuals in the New York Metro area and nationwide.