Healing Hurts

Healing hurts. After an injury or illness, it takes a while to heal and recover our strength and mobility. Sometimes we need physical therapy, sometimes shots to help us heal. Sometimes that short term pain from the prick of a vaccine or medicine is for the long term gain. The same is true when it comes to recovering financially.

2020 was the injury and we are all in pain from it. 2021 will be a year for healing, but it might still hurt a while on the path to recovery.

Sure, we all need a haircut and to get used to wearing real pants again (though we still love you sweatpants). But some of us have had serious financial pitfalls in 2020 that might take a long time to heal.

Did you panic when the virus hit the United States and cash in all your investments?

Did you lose your job?

Did you lose a loved one and perhaps their income as well?

Maybe you are struggling to make ends meet with reduced work hours, pivoting to a new industry, or watching your grocery and other living expense costs rise as some consumer goods rise in costs?

Have you been struggling to recover from COVID-19 or another medical issue and have high doctor bills and/or reduced income because of it?

However you have been affected, in both big and small ways, we all have some healing to do and well, this may hurt a little while we work out the kinks. That may be a BIG undertaking for some folks financially, physically, and emotionally and we are holding space for you. When you are ready, let’s put 2020 behind you and re-evaluate your financial plan, cash, spending, and investments.

Income

How was your income affected by the pandemic? Let’s look at some common outcomes and recommendations for 2021.

If your income was not affected or was but has recovered, you likely gained a new appreciation for the importance of a flexible job and money in a savings account. And we all gained a new appreciation for child care and teachers (they all deserve a raise and trophy). In that case, 2021 is a year to work on beefing up your emergency fund, paying down debts to free up your income from monthly obligations, and counting your blessings. Also, look for ways you can help those who lost their job or are struggling by patronizing small and local businesses, such as hiring and paying a living wage to an out of work nanny, housekeeper, or dog walker, buying art from a local artisan, shopping farmers markets, etc. As for investments, keep focusing on long term growth.

If you lost your job or your income was dramatically reduced,  your focus for 2021 will be on recovering financially and finding a new job or a second job/side hustle to replace your lost wages. While it sounds incredibly cliché, it’s still true that you should try to look on the bright side and this may be an opportunity to find a new industry, get training or finally finish that degree or certification you have been talking about, or try your hand at your entrepreneurial idea. Work in a post-COVID world may be forever changed and some industries may never rebound, but new needs have arisen that also need to be fulfilled. Perhaps your best fit in the future will be in a different type of work role than your prior toils, and maybe that is for the best. To be frank, this may take a while. There is still a lot of competition for jobs as the unemployment rate remains high but that doesn’t mean you should give up hope. Your best bet may also be to find a second job or side hustle to pair with your newly diminished hours to make up for lost income. Keep hustling and grinding with the goal of finding work you enjoy that pays you a reasonable wage and ideally in a capacity that is adaptable in a post-COVID world.

Cash and Assets

A volatile stock market, deadly pandemic, skyrocketing unemployment, and the ease of constant online shopping has done a number on most of our pocketbooks and our asset portfolio in January 2021 probably looks quite different than in January 2020. Based on your situation, here’s a few suggestions.

You may be in a situation where the market’s nosedive in the spring of 2020 dramatically wiped away your stock portfolio’s gains and you planned to now have to push back your retirement date. If you stayed the course and held onto your stocks you have likely rebounded from those losses, phew. But this teaches us a valuable lesson on diversification. You don’t want to ever be too reliant on one financial tool or investment. Hence, don’t sink all your money into real estate, technology company stocks, or bitcoin (actually, just don’t invest in bitcoin anyway). You want to spread your wealth around to try to prevent another market nosedive from torpedoing your retirement plans. Diversifying into several types of investments across many sectors will help reduce your exposure to big losses in any one industry.

Maybe you got spooked by the volatility of the market and you sold all your stocks and parked your cash in CDs or under your mattress. In that case, please get that money out from under your mattress, it’s a fire hazard. Your visceral reaction to the risk in the market may be a lesson teaching you that you prefer safer, low-risk investments. In that case the bond market and CDs will fairly safely store your savings but won’t really grow much over the years. Instead, look to re-invest back into the stock market, perhaps with less risky index funds and while working closely with a financial advisor. Increasing your understanding of investing principles and strategies may help allay your fears and allow you to stay in to ride out any future volatility.

If your budget is blown thanks to increasing prices for groceries, increased electricity usage, paying delivery fees for food and everything else to come to your door, or boredom shopping while you are home all the time, you’re not alone. Countless families have seen their monthly costs rise during the pandemic. Not commuting to work may save on gas, but you are likely spending those saved gas dollars in another place. If this is you, take a close look at your budget. Think about what is important to you and what lifestyle changes you are going to stick with in the coming months. If you are continuing to stay at home to work, you may need to permanently lower your gas budget and increase your groceries budget. Maybe you have upgraded to faster internet speed to work from home or a more luxurious cable TV package since that is your primary entertainment. Choose what extra expenses you need to keep in the coming months and adjust your spending in other places to account for the increased costs. Focus on being realistic and make small, incremental changes which will be easier to implement and stick with.

The pain we are all walking through from 2020 will not magically go away just because the calendar has flipped to 2021. Healing can take quite some time and sometimes the therapy is still quite painful. Financial healing is fairly similar. We may all be recovering mentally and physically from a pandemic, mourning the loss of loved ones and our old lifestyles, recovering from lingering effects of the illness, and struggling to make ends meet because of a job loss or major reduction in hours and income. Taking a long term approach is key to keep our eyes raised to the horizon. Looking only at today can just be depressing and discouraging. But keep on trudging. It may still be tough to find a job or keep up with rising costs on a diminished income, but we are in an upward swing. It can be hard to see progress while you are still in pain, but the progress is happening all around you. The stock market is rebounding from its massive losses last spring, vaccines are being distributed, and an end to this pandemic appears to be in sight. Recovery will never bring back our lost loved ones or reverse ongoing side effects of COVID-19, but walking through the hurt will take us to the other side. Staying the course financially and adjusting to the new normal version of your income, job, budget, or retirement portfolio may feel like walking through broken glass sometimes, but it’s not going to be forever. You will adjust to living with a smaller, tighter budget, grocery and electricity costs will come down, and the job market will recover. Your income will recover eventually as long as you stay the course, keep hustling to find work, and are flexible in what your new normal for work and your money looks like.

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