David Strege, CFP®, CFA, CKA®, Senior Financial Planner
January 10, 2021
We feel that each of our clients has made it through 2020 with very few financial issues. One of the biggest challenges has been extreme isolation as they followed stay-at-home mandates or were locked down in their homes or retirement communities.
As Mike Tyson said about boxing, “Everybody has a plan until they get punched in the mouth.” We certainly got hit hard in 2020, but we feel that it has proved that proper financial planning can pay off. Following sound, basic, disciplines about money has, in most cases, provided the desired security that many people had hoped to achieve from their many decades of labor.
2020 was a year of continuing uncertainty. Unfortunately, a finite date when COVID-19 concerns will be gone is not clear cut.
A safe vaccine has to be distributed around the world. Enough people have to have confidence in the vaccine to get the shot. Then we will still wonder how long we will have immunity after each shot. This will mean months of transition before we feel the freedom to go into stores and restaurants without masks, let alone shake hands and give hugs.
Eventually, we may be able to feel comfortable flying to our desired locations in the U.S. and the world. When you fly, will you still wear a mask if the CDC doesn’t recommend it? Think of the number of people you saw from Asia in international airports wearing masks because of their concerns from the Avian influenza H5N1 that began in early 2004 and went on for ten years. That event killed an estimated 575,000 people versus 1.64 million so far from COVID-19 as of the writing of this article, according to the John Hopkins University & Medicine Coronavirus Resource Center.
Fortunately, most of us have learned to adapt to different events in our lifetimes. This pandemic is a new event to us since few of us were around over 100 years ago when the last major global pandemic of the Spanish flu hit from 1918 to 1920. As we adapt, sound personal financial principles can still be applied.
Spend less than you make.
This one seems to be consistently happening as people aren’t able to travel or even eat out as much. It is amazing to see the increase of bank balances over time.
Have at least three months of living expenses in cash in the bank.
Having cash on hand helps reduce anxiety when unexpected expenses occur.
Maintain an appropriate allocation in diversified asset classes.
The fastest bear market occurred with a 35% drop in the U.S. stock market in 23 trading days. It was followed by the fastest recovery to a bull market in history. A good long-term allocation helps sustain investors as the world and equity markets adapt to a new environment.
The biggest lesson I have learned is to stay in contact with family and good friends. To get through challenges and uncertainties, hopefully you have learned to use the technologies available to have great conversations when you can’t meet in person. This has been the consistent factor for those who have handled the unexpected well.
As AT&T used to say back in 1979, “Reach out and touch someone.” Hopefully our clients felt like we reached out to them enough in 2020 to help them get through this, and we plan to continue to do so in 2021.
Take care and stay well.