Young Scrappy Money Podcast SPECIAL EDITION: COVID-19 and Your Money

While the situation is changing rapidly, many folks are concerned with the impact that Coronavirus Disease 2019 (COVID-19) is having on the economy, their investment portfolios, and even their personal budgets. In this special edition episode, we break down some of the reasons for recent market dips, as well as what you can do as an investor and budgeter to stay calm and stay safe.

Resources from this episode: 

• Young & Scrappy, home to Michelle’s work as a financial advisor and financial coach.
• Dr. Sydnee McElroy and her husband Justin’s humorous but informative take on the rise of COVID-19 on the Sawbones podcast.
• The World Health Organization, which publishes daily situation reports on the spread and prevention measures taken for COVID-19.
• CDC website on COVID-19, which includes great prevention and safety tips, updated as more about the virus and its spread is known.
• A good, basic primer on Fiscal vs. Monetary Policy, from our friends at Investopedia.
• The Wikipedia article on the US Federal Reserve, in case you want to get more in the weeds on what that is and how it works.
• A Bankrate article on the winners and losers when interest rates get cut.
• The Federal Reserve’s March 9 press release encouraging banks to work with their consumers, as well as a New York Times article on the situation.
• A March 11 news story from Bloomberg on the $500 billion Federal Reserve promise to keep the flow of money lending going smoothly.
• A  March 12 Washington post story on more Federal Reserve intervention and the stock market’s big fall.
• Even God Couldn’t Beat Dollar Cost Averaging, the nerdy article that quantitatively shows a consistent monthly investment strategy is better than trying to buy and sell at all the right times.
• A research briefing from Dimensional Funds that shows that US stocks typically have above-average returns in years following big dips like this.
• Jesse G, my editor. If you ever need audio/video editing work, give him all your love and money.

Full transcript:

INTRO: [00:00:00] Hello. And welcome to the Young Scrappy Money podcast. I’m your host, Michelle Waymire. And each week, I’ll be bringing you tips and tricks to help you take control of your finances as well as interviews with people who made big financial changes in their own lives. So join us. And we’ll help you get your financial s**t together. 

Hello, everybody, and welcome welcome to another episode of the Young Scrappy Money Podcast. This episode is unique–different than any other one that we have created so far, because this is a special edition podcast episode. Today we’re going to talk about Coronavirus Disease 2019, or COVID for short. There is a lot of panic out there. A lot of folks are being impacted financially in various ways. And so my goal today is just to give you some perspective, from a financial advisor and financial coach’s viewpoint on what I think is going on. I’m seeing a lot of news articles out there about health, about how to protect yourself and your family. But there’s just not as much information I think on the financial side. So I want to focus on that today and talk a little bit about what I’m seeing in the financial markets, some of the personal financial impacts that this type of pandemic is going to have on you, your family, and others in this community. Then, we’ll just wrap up with some general advice and best practices around staying safe and calm.

As a disclaimer, this episode is recorded on March 13 2020. Things are evolving pretty rapidly. So this definitely could change. This will be out on Monday, March 16. But just know that depending on when you’re listening, you might be getting a little bit of a blast from the past. Also, it goes without saying, but these are all my opinions. These are meant to be general tips and commentary, not specific financial advice. Please consult with a financial professional before making any important personal financial decisions.

[00:02:05] So before we get into some tips, in case you need a little bit of an update, I want to give you some background on this illness. So I’ve been doing some research to figure out what’s going on here, kind of really understand and break down the timeline, just so that you have a good reference point as we start to think about what’s happening in the markets.

So the coronavirus as a separate type of virus really dates back to the 60s. This is when coronavirus as a type of virus was first discovered. I’m not going to get too much into its evolution, but I do have a really great podcast recommendation on that for you, one that is both super funny and informative. It’s called the Sawbones podcast, and Dr. Sydnee McElroy and her husband, Justin McElroy, get into the evolution of coronavirus and some ways that has impacted us in the past. In the required resources on my website at youngandscrappy.com/blog, we’re going to be dishing out a lot of free resources in this episode in particular, so be sure to check that out if you want to get a list of all of the articles that went into the creation of this episode. So I’ll link you to that [Sawbones] podcast episode if you really want to dig into the history of coronavirus.

But just know that COVID-19 is not the first time that a strain of Coronavirus has had big implications on society in the markets. So it’s common for a type of virus to mutate into different strains over time. Obviously, some of those strains are not particularly you know, challenging. Coronavirus is a big cause of the common cold. But you might remember back in 2002, one particular strain of coronavirus was very problematic: Severe Acute Respiratory Syndrome or SARS. This is a human Coronavirus that had big impacts as a global health crisis and factored into the economy. Slightly lesser well known was MERS: the Middle East Respiratory Syndrome. Those are the two Coronaviruses that up until this point had been the big boys for causing health and economic mayhem…. until now. So now we’re essentially experiencing a different mutation of the coronavirus, and that’s Coronavirus 2019, or COVID-19 for short.

So COVID-19 as a strain originated in China in the Wuhan province with the first report happening on December 31 2019. The cause was unknown. So when we talk about cause for a virus, sometimes a virus can mutate, jumping back and forth between people and animals. So there’s no… as far as I know, no cause that we can point to of where and how this virus evolved. But scientists specifically isolated the strain of Coronavirus and kind of named it as a separate strain on January 7 2020. So from there, it’s spread pretty quickly. The first case in Thailand was reported on January 13, then in Japan on January 15, in Korea on January 20, and the first case was also confirmed in the United States on January 20 2020 in Washington State.

The first World Health Organization situation report was released on January 21 2020. And since then, the WHO has been releasing these daily briefings with information on spread, numbers, and effectiveness measures. So if you’re looking for a really reliable source that gives you a global update of how the virus is progressing, I’ll go ahead and link you out to those daily briefings. That’s definitely going to be a much more unbiased source of spread and prevention than anything that you’ll find in the regular news. The World Health Organization does not have any incentive to sensationalize things, so it can be a great resource for you if you’re really interested in looking at those numbers.

I’m not a doctor, obviously. So I’m gonna kind of leave aside the medical stuff, but I will lead you to a link to the CDC website on COVID-19 as well, it’s got some great information on there–more information on what it is, who’s at risk, and how to protect yourself and your loved ones. Do not rely on internet memes to get your information. I’m seeing a lot of visuals circulating around ways to prevent it. Some of those have great information. Some of those are factually inaccurate. So the CDC website’s going to be the best source for you to make sure that you are getting information that is factually accurate, and updated as they know more about this virus.

So as the virus began to spread, and as cases began to mount in the Wuhan province and other parts of Asia, countries really started to take containment measures. So in China in particular, the holidays surrounding the Lunar New Year were sort of extended. Factories were shut down. The government started to ask people to self quarantine at home. This is a big deal, even if it had not spread past China. China is the world’s largest manufacturer, it’s responsible for approximately one sixth of global economic output. So, even before the news kind of became this huge frenzy that we’re seeing today, and even before it started spreading to America, where we here are starting to take some more serious containment measures, we started to see hints that from a health perspective and an economic perspective, this was going to be big. 

[00:07:20] Anytime Chinese factories shut down, that causes ripple effects across the global economy. We’re also seeing effects happen here at home as we are implementing containment measures. You know, we’re seeing closed factories domestically, canceled social events, there’s been a lot of really notable staples of our society that have been canceled… big conferences, group meetups, even a lot of professional sports have been either postponed or canceled, y’all when you know that March Madness gets canceled.. That’s kind of a big deal here in America. So we know that it’s going to be a big one, and that’s going to have some pretty wide reaching implications for our finances.

As of today’s briefing on March 13, there are over 130,000 reported cases and nearly 5000 deaths. So this is on a global level, this is not in the United States. Obviously, if you want to get more updated numbers, you can check out that World Health Organization information. But in short, it’s scary stuff. Emotions are running high, people are stressed out, we’re consuming more anxiety-inducing news than ever. So we’re in a situation where when you’re nervous, you definitely have the propensity to make some decisions that you might regret. So let’s talk about what we’re seeing in the US market as a result of this situation.

I think it’s important to talk about this from the standpoint of the stock market, because it is a good indicator of the overall economy, regardless of whether or not you’re personally invested in it. I’ve seen some folks out there maybe dismissing the stock market saying, “Yeah, the stock market doesn’t matter. That’s only for rich people. I want to know what people are doing for regular Americans or don’t worry about your money.” But I would argue that the stock market really is a metric for what the economy is doing in a broader sense. In the simplest sense, when forecasts for the economy are bad, the stock market’s going to take a dip and when forecasts for the economy are good, the stock market is going to increase in value. So that’s a super oversimplified explanation, but even if you’re not invested in the stock market yourself, I think you have an incentive to use this as a litmus test for what everything else in the broader economy is doing. Like I said, with all the various cancellations, closures, and personal fallout from COVID-19, this is really creating ripples and uncertainty about what we think the economy is going to do in the future. We have some some uncertainty about how quickly we’ll be back online, and how quickly our kids will be back in school, so that our job productivity can be better again, so that people can get back to work in industries where maybe there are more layoffs or reduced hours. It’s important for us to kind of keep tabs on this and understand what’s going on here.

So to understand what’s going on in the stock market, I think it’s also useful to think about how one can improve an economy. So I know this kind of sounds–we’re getting into some more esoteric economics here, but I think this is really good context for why the market is doing what it’s doing. In general, there are really two ways of trying to influence the economy, in the event that we expect some sort of recession–to kind of rein things in and keep the economy from going off the rails. So first off, the Federal Reserve can influence the economy by setting monetary policy and interest rates. If you’re not familiar, the Federal Reserve System is the United States central bank, actually composed of 12 different banks. And it’s like the bank to the bank. So the job of the Federal Reserve is basically to control the flow of money in an attempt to impact the broader economy.

In addition to monetary policy, the government can influence fiscal policy, or government spending. So this includes what projects and proposals get funded, what causes get financial support, and so on. In this case, money for COVID-19 research, testing, and stimulus spending to help out average Americans who deal with the fallout… All of that stuff falls under fiscal policy. And I believe part of why the markets have been so crazy over the last few weeks, is in part because of the general sense of fear and uncertainty. But also it’s a statement about the response or maybe the lack of a good response to that fear and uncertainty.

And I say crazy over the past few weeks, because it’s important to note that market indexes actually hit record highs in mid February. So it’s not like we’ve been on track for, for a “chaos factory” from a stock market perspective. It’s really in the last month that we’ve seen the large stock market indexes take a dive, about 20 to 25% down since then.

[00:12:20] So that’s a lot of change in a very short amount of time. And what that means is if you went through and opened up your statements, your 401k statements, your portfolio statements, depending on what you are invested in, you could have easily opened that up and seen that a quarter of your money was missing. It’s no wonder that people are feeling fear or feeling apprehension about what’s going on.

Given that we can influence an economy with either monetary policy or fiscal policy, what has the response been so far? So we know the markets are kind of taking this dive, what are we doing about it?

Well, on March 3, there was an emergency interest rate cut of half a percent. So the Federal Reserve also sets interest rates. And I’ll link y’all out to some good articles on the Federal Reserve, just because I know this can be kind of a tricky topic to wrap your brain around. But unfortunately, we do not have time to get into the whole history of the Federal Reserve today. So I’ll just link you to some good resources if you need to do a little bit of back research to have good context for what’s going on. But on March 3, there was an emergency interest rate cut of half a percent. So when the Federal Reserve cuts interest rates, the idea behind that type of move is that if interest rates are lower, debt is cheaper, it is cheaper to borrow debt. So basically, this helps businesses want to invest their money, because they can fund projects at a cheaper rate. It also encourages consumers to spend to borrow more money. Generally, the goal here is to make sure that more money is moving around, and it’s kind of propping up the economy. So again, I’ll link you out to an article on what types of folks might benefit from this type of interest rate change. I’ve gotten questions on things like, should I refi my mortgage? And that article will have a couple of nods to those types of questions as well.

On March 9, the Federal Reserve then issued a press release to encourage banks to work with customers who have been affected by COVID-19. So again, we’re seeing not necessarily direct intervention by the Federal Reserve, but just sort of this encouragement… with people being impacted financially, those without a safety net turn to debt. And if banks get really nervous about who is asking for debt, or if you know, debt is becoming something that more people want, then their natural inclination might be to raise interest rates in order to make sure that that investment is solid for [the banks]. So what the Fed basically committed to doing was making sure that banks had what they needed in order to lend money smoothly. So again, I’m seeing a lot of misinformation out there. It’s like “this is a huge bank buyout. This is designed for… we’re bailing out banks, but we’re not helping average Americans.” Regardless of what’s happening in the fiscal policy space, I think the monetary policy really is designed to make sure that money keeps moving. And that part of that money keeps moving into the hands of people who are going to be impacted by these financial events.

On March 11, the Federal Reserve came out again, and now this time, they’re sort of pledging a specific number. So they say we’re going to… we’re going to put $500 billion out there to make sure that banks can keep lending comfortably. And then on March 12, the Federal Reserve promised to make $1.5 trillion available to make sure that banks’ short-term funding operates smoothly. It’s also going to buy $60 billion worth of Treasury bonds for the next month to make sure that anyone who wants to sell out of those investments can do so. I read a quote from Peter Conti Brown. He’s a Fed historian and associate professor at the Wharton School of the University of Pennsylvania. And his quote was, “It’s safe to say the Fed almost never does what it did the last two weeks. the Fed has unlocked its emergency toolkit.”

So already, we’re seeing signs that the Federal Reserve is looking ahead at the economy, seeing and understanding that bumpiness, and trying to take measures to stop it. Meanwhile, despite all of these interventions from the Federal Reserve, the market just kind of keeps slipping and slipping. And in fact, on March 12, the S&P 500 went down 7%, which triggered what’s called a circuit breaker. So basically, when they’re… when there’s a certain decline in one point of time, there’s a 15 minute break that happens. It stops the freefall and kind of gives traders time to recalibrate. Because yeah, that fear and panic can really kind of turn into a frenzy. And so the market basically presses the pause button to try and give folks a chance to catch their breath, sort of metaphorically speaking.

But that day, the stock market overall was down 10%. This was the worst single day crash since 1987. And largely, I think this is due to the fact that basic interest rate cuts and other work towards stimulus simply wasn’t enough. So with that monetary policy, the Federal Reserve is pulling all of the tools out of their toolkit. But in the absence of fiscal policy and actual government stimulus, there’s just belief that monetary policy is not enough. It’s not going to do the trick. And so people continue to freak out, sell out of their stocks and worry about what’s happening in the broader economy.

Finally, today, on Friday, March 13, we’re really starting to see the initial signs of fiscal policy to go along with that monetary policy. So it was declared to be a national emergency. And as of today, there’s also an agreement working… or in the works, I should say, on a coronavirus aid package. This is the Families First Coronavirus Response Act. Supposedly, this is going to include things like free testing and even for the uninsured as well, two weeks of paid sick leave, or family and medical leave. Obviously, there has not been a lot of consensus in our government over the past few years, and so it’s hard to tell what the final bill is going to look like, what the final provisions are going to look like. But there was even a hint at potential increases to social safety nets, things like increasing unemployment insurance, making food stamps more readily available. So while I don’t know what’s going to be in the final bill, be on the lookout for that information, because certainly that’s going to have some wide reaching impacts for regular people who are impacted by coronavirus.

[00:18:42] So, as a result, the markets picked up again on Friday. The Dow Jones market index was up almost 9% after the state of emergency and the fiscal package were unveiled. So it’s not like everything is ruined. But this is kind of where we’re at now. We just don’t know what’s coming next though. I think the economy is going to be shaky for a while. I think if you are an investor and you have access to a market based portfolio, I think you need to be prepared for the fact that the markets might be volatile for a while. These types of situations are driven by expectations of the future economy. And like I said, if we don’t exactly know what the future economy is going to do, that’s going to create some some bumpiness or volatility as we like to call it. No one is really sure what the fallout is going to be at the end of the day. And it’s impossible to ignore factors such as fear, greed, the things that can cause people to make some decisions that maybe are not in their best long term interest.

Now that we kind of know where we are. I want to turn our attention to some things that you can do. So what can you do as an investor to make sure that you’re staying aligned with your long term goals? What can you do as a budgeter, how can you handle your personal finances if you are impacted by the situation? And then I want to wrap up with a couple of little mindset tips for you, ways to take care of your emotions. Because at the end of the day, we’re all we’re all human people here. And it’s not just about what our money is. It’s also about how we feel about our money and our sense of security, our sense of safety or connectedness to our goals. Those are all really vital parts of the equation too. So some of our work may be tactical, but some of our work is emotional or mindset related.

So, like I mentioned, we have a little bit of context for why our economy and our stock markets are so shaky. Let’s talk about what you as an investor can do about it. So if you’re one of the people who opened up your 401k statement and saw that you were missing a quarter of your money, this little segment is for you, my friend, I have nothing but empathy for you. I know this is unbelievably stressful. Just seeing that the stock market is down quite a bit in the last month. I know that there’s fear. I know that there’s anxiety.

I know because I’ve been getting a lot of questions, a lot of folks reaching out to me via email, trying to figure out what to do and how to handle that situation. And I want to tell you that those fears are totally normal. It’s not fun to lose money. In fact, we as humans hate losing money twice as much as we like gaining money. So we have to gain twice as much money to make up for the fact that we lost money. This is called loss aversion. This is an understood and well-studied psychological phenomenon. So your reaction to your portfolio drop is just your brain’s way of trying to protect you from the big, scary external threat of potential scarcity. This is a normal human reaction.

The issue is that selling at the wrong time can be really problematic for a couple of reasons. First off, predicting the bottom of a market drop is unbelievably difficult. In the absence of having a literal crystal ball (in which case, please email me and tell me what’s going to happen, because I have questions!), we can’t predict when the bottom is going to happen. We saw a bunch of dips in the last month or so, but we don’t know whether things are going up, whether they’re going down a little bit more, whether they’re going to up and down zigzag for a few more weeks or months… we just don’t know, it’s impossible to tell. So if you sell your investments, you are selling at the risk of potentially missing out on gains. You know, that’s not a risk that I think you should be willing to take in order to try and mitigate the potential for more decline.

The other issue of getting out… of selling out of all of your stocks at the wrong time is you THEN have to choose when to get back into the market. So even if you get it right the first time, and you’re like, “alright, this was the actual bottom. I have sold at the right time.” You have to guess when to buy at the right time again, and that can be really scary.

[00:22:54] So I’ve seen a lot of people, and this was particularly true after the 2008 financial crisis, there were a lot of people who sold out of their portfolios at the wrong time, or maybe sold out at the right time but were sitting in cash and sort of waiting to get back on the sidelines. And then I saw those people wait years and years, to make sure that all of the dust had truly settled. And in that waiting period, they missed out on the opportunity to recoup some of the gains that they had, that they had lost with their portfolios.

I have a great article for you if you’re interested in this phenomenon. It’s got a cheeky title. It’s called [sic] Not Even God Can Beat Dollar Cost Averaging. And it is a guy who went through and did some research to show that even if you knew exactly when the stock market bottoms were going to be … Even if you were investing technically at all of the right times, that’s actually a strategy that still didn’t do as well as taking the same dollar amount and investing it super consistently every single month regardless of what happens.

So this might be a good opportunity, maybe not to reevaluate what’s in your portfolio… don’t make a decision you’ll regret on whether to sell out of everything. You don’t want to be sitting in cash for your long term goals, or for your retirement fund money, but you might consider shifting around the way you contribute and making sure that instead of putting in any lump sums, or just doing it as you feel like it, that you have a really disciplined approach to contributing. I think a monthly payment that happens on auto-pay and auto-investment can be a great way to kind of take care of this, Just put it on autopilot, so you’re not trying to guess the market. You’re not trying to time things. You’re really just doing your best to stay super consistent with your strategy and put money in for where it needs to go.

I’ll also note that I have seen a couple of folks decide that they’re maybe not going to switch what’s in their portfolio, but they’re going to cut off contributions Just so you know, obviously, if you’re going through legitimate financial hardship, do what you need to do to make sure that your budget’s okay. Take care of that short term stuff first. But at the same time, if you do have money to go around and you can afford to contribute, this is the last time when you would want to cut off contributions. If you know the market’s going down and there’s going to be less money, that means that you as an investor actually would need to contribute a little bit more to make up for that dip. And as a bonus, my guess would be that if you’re contributing a little bit more now, you’re contributing at a lower rate, and you’re going to buy in at a lower rate.

The whole goal of market investing is to buy low and sell high. So that means you have to buy low, even if you have a little bit of anxiety around that process. Now, all of the things that I’m saying here, I’ll remind you, kind of have to do with your long term goals. So I’m really talking to the folks here who are investing for retirement, you’ve got 30 years till retirement. Try and keep that good long term perspective… if you’ve got 20-30 years to retirement, let the market do what it does, and leave that 401k alone!

In the meantime, if you’re feeling really tempted to sell, stay off the news, stop checking the stock app, and un-install it. You may have to put yourself on a financial media fast, because when you consume a lot of those articles, it really, you know, the news is designed to be sensational. It’s not designed to help you. You know, it’s designed to sell, it’s designed to sell news. So just be very, very careful with what you are consuming. Obviously, I want you to be informed, I want you to stay on top of all of the containment measures. I want you to be really aware of what’s going on in the world. But it would when it comes to your investments, the less you can look at and internalize that type of information, the better.

Now one of the other types of questions that I’ve gotten around investing at this point: What if I have extra money and I want to buy more stocks, what should I buy? So if this is you, if let’s say you’re not one of those people who’s super concerned about this, but you’re really interested in buying something, I think that can be a good opportunity.

I always tell my clients that when you are going shopping, you don’t go to the store and you say, “well, awesome shirts are 20% more expensive, and I’ll take two.” No! You want to go when things are on sale. So this is sort of like a little COVID-19 stock market sale. If you need to rebrand it that way in your brain, that’s totally fine.

[00:27:37] But just a couple of important notes here. Obviously don’t use all of your emergency fund to buy stocks. It should go without saying, but I have seen some people try and cash in their savings to make a quick buck in the stock market. Be extremely careful if you have money for short term goals, if you have money for an emergency fund, or if you have cash reserves. You may lose your job, so do not put all of that [money] in the stock market ,because like I said, in the long run, we’ll likely see things start to come back up again. But in the short run, we don’t know what type of additional dips or volatility we’re going to see, especially if it turns out the virus is spreading more than we’re expecting or the economy is impacted more than we think it’s going to be impacted. So, invest in accordance with your long term goals, and make sure that it’s money that you’re really comfortable being tied up for the long term. If this is a great opportunity for you to max out an IRA or a Roth IRA or to contribute a little bit extra to your retirement account, that’s awesome. But make sure that any investments that you choose are really consistent with your long term goals.

I would also argue at this point, it’s probably wise to avoid single stocks. I am not a big fan of single stock investing in general; I think investing in single companies is really risky. There are a lot of great diversified options out there that do not involve placing all of your eggs in one basket for a single company. So, if you are looking to buy, like I said, this could be a great time. But make sure you’re doing it with caution. Don’t throw all your emergency fund away, invest in accordance with your long term goals, and avoid single stocks.

At the end of the day, you know, we have been in similar situations like this before: Ebola, Swine Flu, 9/11. All of those are great examples of things that spread or caused mass fear and anxiety in our world. Things that really felt almost like a point of no return or a big structural change for us. But at the end of the day, all of those things, you know, did end up working out just fine in the long run for the markets. There’s no reliable way to tell when things are going to pick back up. So don’t don’t engage in that guessing game.

Just know that in general… my personal opinion is that I think in the long run, it’s going to be just fine. If you are interested in more market based data, I will also link you out to an article that says… there’s good research to show that equity returns or stock market returns are generally above average in the one-year, three-year and five-year periods following big market declines like this. So typically, it’s common when we see a downward correction, we also see a little bit of an upward correction in the next few years. So all that to say, my friends, if you opened up that stock app, if you opened up your portfolio statement and you started panicking, take some time to your feelings, breathe through it, but don’t do anything that you’re going to regret or that’s going to hinder your long term progress.

So for folks who are maybe not invested in the stock market, or people who might be impacted from a budgetary perspective, I definitely want to identify some tips for you as well. And the first one here is: know how you’re impacted. So there are going to be some certain service workers who are being suspended without pay. Artists, musicians, friends whose work depends on crowds. If events get canceled, you know their livelihood is going to be shook. In particular, the travel, entertainment, leisure, and energy industries… all of those spaces are really going to see a big dip. And I’ll also point out for small business owners, anybody who kind of depends on that social element, just know that that type of work is going to be impacted. Your small business owner friends are probably feeling a little bit stressed out and potentially a little bit strapped and potentially looking for that support from you. So know that if that applies to you, there are definitely some things that you can do to adjust your budget now.

[00:31:42] The first one is, if you need to scale back, be really honest and mindful with yourself. So if you need to cut out the non-essentials, now’s a great time to do that. If you’re looking ahead and seeing uncertainty or you’re worried about how long your emergency fund could last, start to make some cuts. The good news is with social isolation, you might find that your entertainment and shopping budget has gone way down. And this is a great opportunity to turn your attention to some lingering house projects. It’s a great time to get organized, to catch up on your own art, to break out the coloring book or your Kindle. And really dig in and enjoy some entertainment and leisure time activities that do not cost money. But cut out those non essentials if you can, or if you need to.

I also don’t ever want people to feel like they have to do this. But there might come a time when you need to press pause on your goals. So nobody likes feeling like they’re taking a step backwards. If you’re paying off debt, nobody likes to feel like they are, you know, stopping their progress or slowing their progress. So if you need to press pause on those goals, that’s totally fine. Just know that they’ll be there when you get back. It’s much better for you to take care of yourself and make sure that you can get through this than it is to ramp up all of your goals. And just know that there will come a time when that changes for you. So if you’re making more than the minimum payments on debt, but you’re really, really worried about your cash flow, maybe scale back to just the minimum payments, stop using those cards, but don’t aggressively try and pay them off just yet. Sometimes it’s worth taking on a little bit of extra interest in order to really give yourself the peace of mind and sense of security that you’ll be just fine, even if you have reduced hours or reduced income at work.

If you work in a heavily affected industry like that, don’t be afraid to lean in and make sure that you can stretch an emergency fund as long as possible. And if you find yourself without an emergency fund and you’re facing job loss, I would encourage you to reach out to friends and family in your community for help. I know that talking about money is stressful. It is not fun to let folks know that you are in a time of need. And this is also a time when we might be more physically isolated from one another. We’re self quarantining, or you’re in a place where, you know, if you’re immunocompromised, if you’re elderly, you might be staying home… all of those things result in physical isolation. But this is really an opportunity for us to come together and make sure that we’re taking care of our own. So if you are in a good situation, and if you have a friend who you know is really struggling, facing job loss, or doesn’t have an emergency fund. Little things can make a big difference, just offering to grab dinner for them, get some groceries, those little actions can really mean a lot right now.

[00:34:36] Now, if you know that you’re in a sense of hardship, I would also really encourage you, in addition to reaching out to friends and family, if you know you can’t pay something, be really proactive and ask for hardship assistance. So this also includes student loans. It is obviously not ideal to defer your student loans. During these periods, the interest will continue to accumulate. It’s technically going to make it more expensive to pay the loan back over time. But it is far better to make this decision in an absolute pinch to defer your student loans and give yourself a few months without making those payments. So that you can make sure that you’re not tanking your credit score by ignoring those loans as they stack up. 

I would also argue this, this goes for a lot of things. So any big bills that you know you’re not going to be able to cover? Go ahead and proactively reach out, especially if your employment situation changes. You’d be surprised at how many places do offer hardship assistance for people who are unemployed. And getting back to the student loans situation, if you are unemployed, if you are experiencing job loss and your income changes drastically, know that there are plenty of income based repayment plans available to you. If you feel like you can’t make your student loan payments, you might be able to get on an income-based repayment plan that has extremely low payments in the event that your income also dips extremely low. So you do have options. Do not feel like you don’t have any choice. You, you do often have more choice than you think you do when it comes to making payments, but it is unfortunately on you to be proactive and ask for that hardship assistance when you need it.

If you don’t need to scale back, if you’re in the lucky set of people who have the type of privilege where you don’t need to scale back, your job is fine, or you’re switching to working remotely and everything is hunky dory, check in on your neighbors! I cannot encourage this enough! Make sure that the people in your life have the groceries and necessary supplies that they need. In addition, buy some art from your artist friends. Donate to your local food bank. Obviously I’m not telling you to go out and spend all your money on other people. Don’t put your own livelihood at risk, or put yourself in a situation where you would need help. But if you are in a solid financial place, this is a really critical time for you to pay it forward as much as you can.

So that’s where we’re at. You guys, I hope I hope you’re all doing okay. Look, I know this really sucks. Like, I cannot say this enough. This is shitty for a lot of people, but it’s okay to feel your feelings about it. It’s okay to be nervous, it’s okay to be scared. It’s okay to be anxious about what’s going to happen. Those are all normal human responses. It’s okay to feel those things. But just be very gentle with yourself in the coming weeks and months, we’re all going to need a little bit of help to get by, we’re all going to need a little bit of help from one another.

Take care of yourself. Give yourself permission to spend some time relaxing, go up some walks outside, drink some nice hot tea, do yoga in your home, do what you got to do to try and bring those stress anxiety levels down. Stress and anxiety does have a pretty big impact on your immune system. So the more you can kind of take care of yourself as you are taking care of everything else in your life, the better.

In addition, I can’t encourage this enough–please stay connected. Text your friends. Watch movies together via video conference. Reach out if you’re feeling isolated. There are gonna be a lot of people in situations where they’re not able to leave their homes, they might need a little bit of moral support, in addition to financial support. So we’ve got to link up here, we’ve got to stay connected, and just make sure that folks have what they need.

I’m here for you. I know that this sounds, you know, that this is a lot. There’s a lot going on. I know that your financial situation can be stressful. Talking about it with somebody could be stressful. Like I said earlier, we don’t like to talk about money. But if you need a private one-on-one, if you just need a little bit of empathy or sympathy, just reach out to me, my email address is [email protected] and I’ll just do my very best to hold space for you. Make sure that you kind of have financially and emotionally what you need during a really stressful time period.

So that’s it, y’all. Take care, be safe, wash your hands, and be really, really kind to one another.

END CREDITS: I hope you enjoyed this episode of the Young Scrappy Money podcast. If you want to read about my work as a financial advisor and financial coach, you can do so at www.youngandscrappy.com. That’s www.youngandscrappy.com. Thanks again for listening. 

Made with love by Jesse in Atlanta. [SMOOCHING SOUND]