With COVID-19 well underway and impacting everything from the economy to everyday life, here are a few financial planning strategies during a crisis.
1. Understand your budget. During uncertain times, spending usually reverts to a survivalist mentality. This is a good time to prioritize what really matters most. As we’re all staying home during COVID-19, entertainment and food costs have greatly reduced. I know I’m cooking meals and finding new ways to entertain my kids at home (and I’m also more appreciative of teachers and schools than I ever have been!). While this new normal is only temporary, getting a handle on your budget doesn’t have to be. A solid budget can also lead to improved savings, which may be paramount if there’s any income loss from COVID-19.
2. Make sure your protection is solid. Oftentimes, I start my financial planning process with a protection audit, which is typically just reviewing insurance policies and legal documents, translating them, and providing education about what’s currently active and what’s available. During any period of uncertainty, this is likely the most important aspect of your plan. I’d recommend everyone review their insurance policies and make sure there’s a sound, rational understanding of each policy. You should do the same with your legal documents. With physicians on the frontlines, they’re all taking personal risks to protect the world from this pandemic. For anyone who fits the “at-risk” profile of COVID-19, getting your affairs in order is no longer a theoretical exercise. It’s important for physicians to take care of themselves and their families while battling this virus.
3. Liquid savings are more important now than ever. With the healthcare system shaken, job security is a little less stable. For many, job security may be solid, but income security may be the item that’s being shaken. For RVU contracts, telemedicine doesn’t reimburse as much as a clinic visit, and any non-emergency patients are encouraged to delay or cancel their appointments. I’ve heard of some hospitals cutting pay for physicians during this time as well. These are certainly strange times, and liquidity translates to safety and control. Retirement plans can sometimes be liquidated early, but usually at a high cost of taxes plus penalty. Real estate investments aren’t necessarily providing much cash, as many tenants aren’t able to pay rent currently. In every financial plan, I always talk about the importance of liquid savings; it’s times like these I’m glad I do.
4. Stay the course. Don’t panic and act out any “knee jerk” reactions. The market is down, but it’s not due to a poor economy with underlying defects. Consider keeping invested what’s invested. Losses only occur when the shares are sold, so holding on to your investments and letting the markets bounce back might be the best strategy. There are many people who have been able to buy into the market at a remarkedly low price, compared to a month ago. I’ve advised people to both buy and to not buy, all based on their personal situation, so there’s no one answer for everyone. Some people have to liquidate their positions to purchase food, but if you’re not in a situation where you have to do that, you might consider riding the wave of the downturn to capture the coming upswing. No one knows when it will be, and your guess is as good as mine, but it will happen eventually.
I can’t stress enough the importance of doctors taking care of themselves and their families financially during this pandemic. If there was ever a time not to procrastinate on their financial planning, it’s now.
Paul Morton is an investment advisor, Midwest Private Client Group.
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