April 20, 2020- Last May, we posted an article here entitled Five Ways to Get Ready for the Next Great Recession.   

Here we are. 

As fast as it takes to turn off a light, our robust economy has come to a screeching halt. 

This may or may not be the next Big One. We may have a V-shaped recovery, or this may turn into a depression. Time will tell. 

Over the last several weeks, there have been many anxious reactions to this crisis. You may have asked some of these questions:

• Should I sell out of the “market” to protect my losses? Should I have sold at the top of the market when an “expert” predicted this?

• If I sell out, how will I know when to get back in?

• With all the forecasts, how can I know who to believe?

• If this market has bothered me, should I be in stocks at all?

• Do I have enough cash to get through this crisis without squeezing my lifestyle? What expenses should I cut now? How much am I spending?

• Am I going to be able to make payroll? Am I going to keep my job? If I lose my job or my business, what am I going to do?

• How am I going to make payments on my obligations? What banks/landlords should I contact to see if I can delay payment?

• If things collapse, what can be taken from me?

• How will this event affect my children, parents, business partners or friends?

There is a silver lining.

Events like this can be used as a catalyst to create a financial plan that manages what is within our control. This is the time to define your steps so you have confidence going forward – both at the next economic peak, and the next time someone turns off the light. Before this crisis is over, be sure to have an answer for these questions:

• How much of a cash buffer should I have?

• How can I structure cash flow so that my family life is insulated from the emotional aspects of the next bust and to avoid “lifestyle creep” during the next boom?

• How can I protect my business so we are not suffocated next time?

• How much risk can I take in my investments?

• What will I do with my investments the next time we are at all-time highs? Or the next time there is a crash?

• What investments/real estate/competitors can I buy now at discounted valuations?

• How can my tax plan take advantage of this situation? How can I use this crisis to lower taxes in the future?

• Is my legal and insurance structure adequate to protect someone from taking my assets in good and bad times?

• How can I teach my family to be prepared by watching and understanding what is happening now?

The pace of change this year is turning out to be difficult for many to absorb. We are still early in reacting to the Tax Cuts and Jobs Act of December 2017. The SECURE Act became effective January 1 of this year and fundamentally changed much of retirement planning. The stock market crashed. Many people have lost their livelihoods this year. And, the mammoth CARES Act was signed into law on March 27 as part of the stimulus for this crisis (our summary of this law can be found here: CARES Act: The Coronavirus Stimulus Law). We are in an election year. With Federal spending ballooning this year, surely there will be an appetite in Washington for higher taxes next year, regardless of the outcome of the election.

Be sure you have a plan that covers all these components and eventualities. This will provide the foundation for sound decisions to carry you and your family through this turmoil. Ultimately, capitalizing on opportunities rather than reacting defensively will put you in a stronger position to achieve your long term goals. 

Now is the time to do this.   

Don’t waste this crisis.