Lessons After Lockdowns
So, it has been about one year since the lockdowns began and what a year it has been. I have done a lot of reflecting the last few weeks and looking back there have been a few lessons learned through my experiences.
Lesson 1: How was your financial health during 2020? Are you better prepared now?
I guess the best place to start is regarding financial health, I am a financial planner after all! As the world began to shut down, like many people, I naturally had fears about how this will impact my clients and how I will be able to conduct business. How quickly we all adapted and virtual meetings became the norm almost immediately. I was very fortunate that my fears subsided as my clients were for the most part doing ok and I was able to continue growing my business. Sadly, this is not the case for millions of Americans, especially those that work in the restaurant, hospitality, travel or transportation industries. Even worse, those in these severely impacted sectors that never set up an emergency fund for themselves in case there was an emergency or unforeseen event like this.
It does not matter where you are financially in life, everyone needs an emergency savings account as a bare minimum for basic financial health to be prepared for the certainty of uncertainty. Once your emergency savings is at an appropriate level (6-12+ months’ worth of living expenses depending on job and income stability), you can begin investing to grow your assets over time. Depending on your situation, the earlier you can begin investing in a retirement account and/or personal investment account the better off you will likely be financially later in life. Your financial health is important, this is not something you want to procrastinate.
Lesson 2: How did you react to markets and events in 2020?
Another lesson is the reactionary behavior that some people take when they see the markets selloff, especially as quickly and dramatically as they did in the first half of 2020. While my sounding board is always the same during selloffs, “unless you have a known expense or believe you will need some of your invested assets within the next 12-24 months, the best course is almost always to stay invested”. Don’t get me wrong, trying to “stop the bleeding” is a perfectly natural and normal emotion to feel when you see the news show the selloff, and/or the alerts on your devices notifying you of the selloff, or looking at your accounts online and seeing the value go down day after day. However, numerous studies show this is the worst action an investor can take and will often lead to lower performance over the long term.
This advice and guidance is where I believe an advisor truly adds the most value, preventing these emotional investing mistakes. Remembering why you are invested, the strategy that has been put in place for your unique goals, and that you are invested for the long term significantly helps reinforce that selloffs are a normal part of the investment process. Studies indicate that how much people save and the financial decisions they make have the biggest impact on their financial health, even more so than their investment selections.
Lesson 3: How is your health? Did the pandemic change your health habits?
The third lesson I learned is the importance of taking care of yourself. Too often we get caught up in the hustle and bustle of life, between work, taking care of our families, etc., it is easy to neglect our own health. After playing football for years longer than I probably should have, even with injuries, my shoulder got to the point I could not have a catch with my kids anymore. In December 2019, I had surgery to repair my left shoulder which had about 80% of the labrum torn, the upper bicep tendon completely torn off the bone and some rotator cuff repair. When I could not go to physical therapy anymore as of March 2020, I began strength training on my own and I am proud to say for the first time, probably since college, I have consistently exercised and feel great. The aches and pains I would experience regularly have gone away. More importantly, I believe it has helped me from getting cabin fever from what seemed like never-ending lockdowns. Any physical activity you enjoy doing, do it and do it consistently. It does not matter your age or fitness level, a daily walk or a few hours in the gym, anything is better than nothing and over time your body will thank you.
This goes for food as well. I am a sucker for taking the easy way out with an unhealthy “quick bite” or having some fries with that, however, anytime my wife or kids begin to feel sick or if I feel like I am coming down with something, I immediately eat a lot of veggies, fruits, soups and tea. It almost always works for me and I have avoided many bouts with the flu, colds, etc. while around sick family members. This includes my bout with COVID just before Thanksgiving where I was very fortunate to just have very mild symptoms for a few days. Maybe I have just been lucky, maybe loading up on fruits and veggies is a helpful natural remedy. Either way, I do not believe eating more healthy, natural foods will do more harm than good.
Finally, one of the greatest things that was drilled into my head by my high school math teacher, was “it’s not what happens to you in life but how you react to it that’s important”. COVID, the shutdown, the markets, the certainty of uncertainty are all out of our control. However, we can control how we react and respond to each of these. The critical part is that we do not react impulsively or emotionally. Take a few moments or a few days, however long it takes, to think about it logically so you can respond rationally. This will usually result in making a smarter decision.
Remember we are here for you! Contact us anytime you have questions or concerns about your financial health and we can guide you in the right direction.
Be happy and stay healthy!