How We’re Managing Our Money During the Coronavirus Pandemic
As COVID-19–the disease caused by the novel Coronavirus–ravages the world, I feel fear and helplessness. My children’s school–and every school in our state–is closed until April 6th (or later). Bars and restaurants are closed. In neighboring states, everything save grocery stores and pharmacies is shuttered. The NBA, NHL, MLS and MLB all cancelled their seasons. Broadway is closed. Disneyland shut its doors. The stock market is spiraling down. Things are not looking good, folks. So what can we do other than stress out and inhale our quarantine snacks while refreshing our news feeds? We can do frugality. Our spending is something we can control in a world that feels out of control.
Choosing To Stay Home
Starting on Monday, my family and I decided to put ourselves in self-imposed isolation. We’re not going anywhere or inviting anyone over. We’re not going to the grocery store, we’re not going to the library, we’re not going to the pharmacy. This might seem like an extreme response, but we’ve chosen total isolation for the following reasons:
1) We can.
My husband and I have the extreme privilege of already working from home. As long as we have internet, we can work. This is a profound privilege and I know this isn’t the reality for many people. Since we have this ability to stay home, we feel a duty to do so to remove ourselves from the pool of people who could possibly get sick or get others sick. There are many people who cannot stay home–doctors, nurses, grocery store cashiers, etc–and so those of us who can stay home, should. If you can swing it to work from home or stay at home, do it and do it now, as our government advises.
2) We can flatten the curve of new cases.
By taking our family out of circulation, we hope to decrease our chances of requiring a Coronavirus test, treatment, hospital bed, ventilator, and of course, the precious resources that are our healthcare workers. If we can keep the four of us home and healthy for a few weeks, we can–in our own small way–reduce the stress on our healthcare system. The issue is that when everyone gets sick at once, there simply aren’t enough medical resources to care for everyone.
At the very least, by staying home for a few weeks, we can delay contracting the disease so that our hospitals and healthcare systems aren’t all flooded by patients at the same time. More about the need to flatten the curve in this article: Coronavirus: Why You Must Act Now.
3) We can avoid infecting others.
We are not sick, but the cruel thing about a virus is that any one of us could unwittingly be an asymptomatic carrier, meaning we could get other people sick without even realizing we’re carriers of the virus. For this reason, avoiding contact with others protects us and them.
4) Staying home is the only way to truly avoid contact with other people.
Yes, we wash our hands and don’t touch our faces and try to get our kids to do the same (you can guess how well that works… ), but the only way to truly avoid any contact is to not see other people. This sounds like an abstinence-only campaign (which, for the record, I don’t support), but I can’t think of any other way to word it. Unfortunately, this virus lives on surfaces long after an infected person has touched them and it can also be transmitted through airborne respiratory droplets (source: The CDC).
What Should I Do With My Money?
The Coronavirus is taking a horrific toll on the US economy. The market is in free fall, businesses are closing, and people are getting laid off. It feels cataclysmic from a financial perspective, but it’s important to remember that we’ve been here before. The previous sentence could’ve been written to describe the fall out from the Great Recession in 2008. So yeah, things are bad, but they’re not unprecedented and we’ve weathered financial storms like this before. I’m no prognosticator and I can’t guarantee the economy will bounce back, but I do think this is a time when historical trends offer perspective: the market bounced back from the Great Depression, the market recovered after the Great Recession. In short, it’s bad, I won’t pretend it’s not, but there are some common sense things we can all do right now:
1) Don’t touch it.
I can’t give you investment advice, because I’m not a financial advisor, but I can tell you what my husband and I are doing with our money: we’re not touching it. We’re not tinkering with our retirement investments, we’re not selling our taxable investments, we’re not buying tons of stock, we’re doing nothing. There’s nothing I can do to influence the stock market, so I’m going to let my investments ride. I’m going to continue investing at the same rate I always do and resist the urge to increase or sell my investments. Nothing good comes from panicked investing/un-investing.
Pulling our money out of the market right now would be the equivalent of selling at a loss. Additionally, trying to time the market and shoveling more money into it could prove unwise since we have no idea if the market has hit bottom yet. For me, the key to weathering a storm like this is to stick with the plan I created when the markets were good.
The reason we don’t touch our investments during a time of crisis is that our portfolio is balanced and able to weather a down market. Since we’re young(ish), our portfolio is more aggressive and risky, which means we lose more in a market like this, but stand to gain more when the market recovers. If we were old(er) and closer to traditional retirement age, our portfolio would be far less risky and much more conservative, which means we wouldn’t lose much in a downturn (and also wouldn’t expect to gain much during a recovery).
This is what it means to have a target-date or age-appropriate investment strategy. When you’re young and have a lot of runway before traditional retirement, you can capitalize on the wild swings in the market to grow your wealth over time. When you’re old, and don’t have much runway left, your investments are more conservative so that you don’t lose your retirement funds right before you need them.
If you’d like to learn more about investing, I recommend the following books and resources:
- Broke Millennial Takes On Investing: A Beginner’s Guide to Leveling Up Your Money, by: Erin Lowry
- (affiliate link)
- The Simple Path to Wealth: Your Road Map to Financial Independence And a Rich, Free Life, by: JL Collins (affiliate link)
- The Bogleheads forum
2) Embrace frugality.
If you were waiting for me to get to the part about where you can actually DO something, touch something, throw your arms around something and smooch it, well, your wait was not in vain. What you CAN do right now is reduce your spending.
This is the #1 reason why I love frugality: it’s something you can do all on your own, without external intervention, without anyone else’s involvement, and you can start ANYTIME and for ANY reason.
Coronavirus is one of the best reasons I’ve heard for embracing frugality. If you, like me, desire proactivity in response to this global pandemic, then frugality is for YOU!! I do not know what’s going to happen with the market or the economy. I do not know what’s going to happen with this virus. It looks like it’s bad and going to get worse. I can’t control either of those things. The one thing I can control right now is my spending.
If you do not have an emergency fund saved up, now’s the time to start one. An emergency fund should be kept in an easily-accessible bank account, such as a high-interest checking or savings account, NOT in investments, retirement funds, or cars/houses/expensive china. An emergency fund is money you can access immediately in an emergency. The general rule of thumb is to have three to six months’ worth of expenses in your emergency fund, meaning three to six months worth of what you spend every month. This is why it’s so important to track your expenses–I use and recommend the free expense tracker from Personal Capital.
3) Look into refinancing your mortgage.
The Federal Reserve slashed interest rates to near zero and so, right now might be an excellent time to get a lower interest rate on your mortgage. This is one of the only positive impacts of the market’s turmoil. It’s at least worth investigating if you can qualify for a lower interest rate.
4) Do a full assessment of your finances.
If you find yourself at home, with more time on your hands than normal, this could be a fabulous time to do a self-assessment of your monies! Doesn’t that sound AWESOME? No? Really? Am I the only one excited about this? Come on, you guys! It’ll be fun!!
One way to do this is to sign-up for Personal Capital, a free online money management service (affiliate link). I like Personal Capital because it tracks your spending, your investments, your retirement savings, and gives you a real-time picture of your overall net worth. It’s a super comprehensive way to view all of your money in one place, which I think makes it easier to understand your full financial picture. If you want to know more about how Personal Capital works, and why I use it, here’s a post I wrote about it.
To accurately analyze your finances, here’s all of the info you want to pull together:
- Your household’s net income: this is how much money you make every month MINUS all taxes and other withholdings.
- Your household’s monthly spending: this is every dollar you spend every month, including rent/mortgage, utilities, groceries, etc.
- A list of your debts: everything you owe money on (house, car, credit cards, student loans, etc).
- A list of your assets: all the money that belongs to you (retirement accounts, savings and checking accounts, the equity in your home, taxable investments, etc).
- Your net worth: your assets minus your debts.
The reason to do this is to give yourself a realistic view of how you’re doing financially and what changes you can/should make during this time of upheaval. Reducing your monthly spending is one of the quickest ways to put yourself on firmer financial footing as it’ll allow you to increase your assets and decrease your debts.
Assess Your Risk Of Losing Your Job
This virus–and the probable impending recession–will hit everyone differently. In light of that, everyone should perform their own risk assessment taking into account all of their personal circumstances. A recession and a global pandemic are bad for everyone, but it’s going to be worse for some folks than it is for others. As ever-more cities and states close retail outlets, bars, and restaurants, folks who work in the service and retail industry are going to be especially hard hit. If you foresee losing your job–or if you already have–you should make a decision right now about how extreme you need to be in reducing your spending.
How To Save More Money Right Now
I have a free, 31-day money saving course, called the Uber Frugal Month, which anyone can sign-up for at any time. It’s free and it guides you through a month-long program of how to save more money.
Since we’re staying home–along with a lot of other people–this is the month where we can save in all of the following categories:
- Transportation. Not going anywhere = not buying gas, not buying plane tickets, not buying mass transit passes.
- Entertainment. There’s literally nothing to do. No movies, plays, concerts, or orgies. Just making sure you’re paying attention.
- Bars/restaurants/coffee shops. They are not open, so you can’t go.
- Discretionary shopping. Malls and retail stores are closing, which will limit our shopping capabilities.
How To Stock A Pantry
If you’re still going out to the grocery store, I think now’s the time to stock up on shelf-stable foods. In general, the farther foods are from processing, the cheaper and the more shelf-stable they’ll be. For example, instead of buying a loaf of bread, buy the raw ingredients to bake bread (flour, yeast, etc). While everyone’s tastes and diets differ, there is a truism that buying bulk, raw foods gives you the most flexibility in your cooking and costs less. In stocking up, we focused on things that can be made into lots of different types of meals and that’ll last for awhile in our pantry. Here’s a list of what we bought in case it’s helpful as you craft your list.
Stuff with a long self life that can be cooked into a wide array of meals:
- Dried beans (black, kidney, and garbanzo)
- Flour (whole wheat and all-purpose)
- Baking powder and baking soda
- Yeast (essentially all bread and baking ingredients)
- Shelf-stable grains (brown rice, quinoa, oats, whole wheat pasta)
- Olive oil
- Coffee, tea, wine, and beer
- Peanut butter
- Alliums (onions, shallots, and garlic)
Next up are the things we bought to put in our freezer:
- Frozen vegetables
- Frozen fruits
- Meats that can be frozen (we bought chicken, beef, and salmon, but just about any meat will do fine in the freezer)
- Frozen pizzas
Then, we bought fresh ingredients that’ll last a decent amount of time:
- Citrus (limes, lemons, oranges)
And finally, we bought fresh produce that we’ll need to eat in the first week or so before it goes bad:
- Salad greens
- Red peppers
Then we have the foods we preserved and canned from our garden last summer:
- Tomato sauce
- Apple butter
- Maple syrup
- Dried tomatoes
- Blackberries (in the freezer)
We hope that with the above we’ll be able to avoid going to the grocery store for at least several weeks to a month. I’ll keep you posted on how that plays out.
Keep In Touch
I’ve been trying to post on Instagram every day to keep in touch and to provide our community with a platform for conversation and I’ll try to write here on Frugalwoods as much as I’m able. While today is all Coronavirus all the time, not all of my writing will be on this topic. Know that I’m at home with my two-year-old and four-year-old and probably feeling very much like everyone else: scared, isolated, and wondering how we’re all going to come through this. But I also feel empowered by the things I CAN do right now and I encourage you to identify what you can do to feel as proactive and productive as possible.
It’s not a major hardship for my family and me to self-isolate, which is another reason for our decision to do so. We don’t have ongoing medical conditions that require doctor visits, we don’t have to leave home to work, and so, we’re removing ourselves from the social equation right now. Not everyone has the luxury of staying home, but for those of us that do, I think it makes sense to be one less potentially sick person requiring medical resources, which are likely to become taxed, if the dire and tragic situation in Italy is any indicator. If you can stay home, do it. If you can keep yourself away from other people, do it. You’ll help limit the spread of the virus, which in turn will help preserve precious medical resources, which in turn will keep us all safer.
In a time of uncertainly, one of the best things you can do is have an awareness of your financial situation. Don’t be in denial, don’t hide from it–print it out and come face to face with the decisions you and your family need to make in the coming weeks and months. This isn’t going to be an easy time and it’s not going to be over quickly. Act now to reduce your spending and limit your contact with others so that you can ride this out. We’ll do this together, but not while touching or breathing on each other.
For more information about the Coronavirus global pandemic, here are some reputable resources:
- The World Health Organization: Coronavirus disease (COVID-19) advice for the public
- The Centers for Disease Control: About Coronavirus Disease 2019 (COVID-19)
- The New York Times (I especially appreciate their podcast, The Daily, which has done a phenomenal job reporting on this topic)
- NPR: a great source for breaking news and information
- Coronavirus: Why You Must Act Now
How can Frugalwoods be helpful to you during this uncertain time? What would you like to read about while we weather this storm?
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