“Your surfing can get better on every turn, on every wave you catch. Learn to read the ocean better. A big part of my success has been wave knowledge.”
- Kelly Slater, Professional Surfer
Under the cloud of COVID-19, in the roiling seas of a global pandemic, leaning into fear and pessimism could lead to a financial wipeout. Turning to experienced, well-respected financial advisors can restore confidence and renew the strength needed to stay upright. Even in the best of times, everyone’s personal finance situation is unique. Not every piece of advice will apply to each individual or family. However, our experts offer both general principles and some more specific strategies that most anyone can apply or adapt to their own set of circumstances. Larry Jones is Executive Vice President/Central Kentucky Region President of Community Trust Bank, Inc. in Lexington. Billy Lanter, CFPⓇ, CTFA, AIFⓇ is a Fiduciary Investment Advisor with Unified Trust Company.
The first steps to managing personal finances in times of economic uncertainty are to prioritize immediate needs and focus on the top priority first. “Get the bills paid,” says Larry. Available funds go to rent/mortgage and utilities before anything else, even in the best of times. “Know what your cash revenue streams are going to be. Are they reasonably certain?” For those with financial difficulty prior to coronavirus mitigation efforts or for those who may have been dealt a blow since, being well-informed about severance and unemployment options is vital to filling in the gaps. Many more individuals qualify for unemployment and more compensation is available now than ever before. Being aware of the changes and following up on getting access to these funds is key. Billy emphasizes the importance of an emergency savings account in times like this. Having cash on hand and readily accessible will help to manage some debt load. Monitoring and eliminating some expenses, particularly ongoing subscription services is one way Billy recommends lightening that burden.
Unless you have been mismanaging money all along, this is no time to reinvent the wheel. Larry also recommends evaluating expenditures; but, “You don’t need to run scared.” He mentions the 1918 Spanish Flu Epidemic and the 2008-2009 recession. Just like those times of hardship, “We will get over it.” Billy agrees that, especially if you can maintain job security, “History is on your side from an investment standpoint.” Depending upon what retiree group you fall into, you may want to reevaluate your risk tolerance. As Mike Tyson once said, “Everyone has a plan until they get punched in the face.”
With the swells and rogue waves out of the stock market lately, this is a scary time to peek at retirement accounts. “Just leave them alone,” says Larry, “Keep contributing what you’re contributing.” Billy thinks, “It’s ok to look, as long as you don’t react. It’s a snapshot in time.” Most retirement accounts rebalance automatically. Consult with a financial advisor before making any transactions, especially at this point in time. According to Larry, “Don’t sell right now and take a loss, especially if it’s a good company,” and “You can’t deal with long-term planning on short-term volatility.” Don’t operate on the Fear Index. “Managing volatility is more about managing emotions. If I keep you from making a bad choice, I’m doing my job,” Billy says. “Don’t trade anxieties.”
Billy and Larry agree that this is a good time to consolidate and refinance to help with cash flow. But don’t go out and borrow, if you can help it. They recommend putting a tax refund or stimulus payment toward basic household expenses, building on an emergency fund through FDIC-insured high-yield savings, a money market account, or short-term mutual fund, or paying off high-interest credit card debt or auto loans. “No luxury items!” Billy points out that a healthy balance sheet will be better for stimulating the economy in the long run.
Consulting with a financial advisor and reevaluating money management strategies “should be more of a process than an event,” according to Billy. Similarly, Larry says to gauge those things by your own comfort level, “whenever you feel like you need that association,” but at least twice a year is suggested. They conclude with these considerations: Billy cautions against short-term emotions playing into long-term strategy. “History rewards stocks more than it punishes them. The risk right now will deliver returns in 3-5 years.” Larry boils it down even further, “Don’t panic. Understand that this is relatively short-term. Don’t lose your confidence.”