As I write, our economy is coming to a screeching halt. Life is going from freedom to confinement at home. It almost feels like you are taking your life in your hands to leave to go to the grocery store, where controls have been set up to stop overcrowding and hoarding of commodities. Large, multi-national companies such as GUESS, Bath & Body Works, and The Cheesecake Factory are either closing their doors for at least ten days or highly modifying operations to combat the spread of COVID-19 (Coronavirus).
Hopefully you aren’t on the receiving end of any financial impacts from these closures through layoffs or furloughs. If you are, I send my best hopes that you have a plan in place and an emergency fund. Our leaders in Washington are trying to minimize the impact of this outbreak on our economy. Today there is talk of potential cash stimulus being sent out in the form of $1,000 or more checks to individuals. Such drastic measures seem to be gaining bi-partisan support and if leaders really do act swiftly, we could see money in the next two weeks. So, what should you do if you get some extra money from the government?
First, remember why this money is being sent out: to help people cope with unexpected expenses or loss of income due to COVID-19 impacts. Perhaps you end up getting laid off from your restaurant or retail job, without pay? You need to save this money or keep the lights and food going in your home. If you do lose your job, try applying for unemployment insurance through your state. Don’t be too proud. It is meant for us in times of need! Even if you are currently secure, the most prudent thing to do would be to add this to your savings for now. Perhaps in a few months this will all be over and will be remembered like an apocalyptic movie. If that scenario pans out, then go spend your windfall this summer. The worst-case scenario would be you losing your job due to a continued downturn in the economy. In this case, you again need that extra money.
For those of you with investments that are tanking due to the markets almost literally going off a cliff the last two weeks, just hang tight. Hopefully you weren’t planning on retiring in the next week or two since you hadn’t reallocated your funds, so you’re in it for the long run. Just keep working as long as you are gainfully employed and contribute like you have been. If you can, it is a good time to ratchet up your contributions because stocks are on sale and your contributions to retirement plans buy more shares!
If you have cash well beyond your emergency fund of three to six months, it may be a good time to buy up some cheap stocks now, or in the near term, of companies that have been dragged down but have great long-term prospects. I can’t believe how discounted UPS and FedEx shares are since people are now stranded at home in many areas with only e-commerce to scratch that retail therapy itch. Also, some strong retailers such a GUESS and American Eagle Outfitters have seen their stock dump by as much as 75% since last month. Although they will be closed for ten days, it is highly unlikely solid companies will go under and within a year, it is likely share prices will return to where they have been in the past year. If stock picking isn’t your game, then buy an index fund that follows the DOW or S&P 500. If you have cash to invest now, it is likely you will see the biggest rewards for buying when everyone else is running for the exits.
These are just a few suggestions on how to manage your money in these uncertain, yet opportunistic times. I would love to hear how you are managing your finances today. Are you doing the same thing as before, are you saving more, investing, or doing something completely different? Leave a quick comment below!
It’s also a great time to give money or time to those in need! If you can spare it, see if you can support those in need in your local community.