Finances, Covid-19, and Your Mental Health – Part 1

Finances

To say that anxiety levels are at an all-time high right now is a laughably obvious statement. Adding to this anxiety is the constant bombardment of information. There is so much coming at us, it is difficult to know what is credible and what should be discarded. This is particularly true when it comes to the information we are receiving about our finances—a subject, that even without the inclusion of national pandemic, can create a certain amount of tension.

When dealing with uncertain times, obtaining information from credible sources is always the best policy. With that firmly in mind, we reached out to a couple financial experts; namely Bret Farris, Senior Advisor, BKD Wealth Advisors, and Andy Saeger, Director, Private Wealth Advisor, BMO Private Bank, to get their advice regarding how to keep emotions in check, and make sound decisions, with regard to your finances, in the midst of the Coronavirus crisis.

What is the emotional impact of Covid-19 pandemic with regard to finances and investments?

Bret Farris (BF): “In the words of the great Douglas Adams… DON’T PANIC! I think everyone is scared, plain and simple. It’s important to remember that it’s ok to be scared, but right now, mental health and physical health have never been more important. Don’t watch the stock market; although it is an emotional response to humanity’s confusion and panic over everything that is happening. Economic fundamentals were fairly consistent and generally strong leading up to this. The Federal Reserve and Congress have taken positively massive actions to keep the county stable for the near term. Unless you are in retirement already, you likely don’t have to worry about the performance of your 401(k) or other investment accounts right now. If you are retired, your investment allocation should tilt towards conservative investments to begin with. Whatever your situation is, the worst likely outcome is selling and trying to time the market.” 

Andy Saeger (AS): “Worrying about how markets will perform is human nature, but constantly watching your portfolio, and agonizing about it can negatively affect emotional well-being. I am also noticing that when people see decreases in stock prices it creates a feeling of regret to those who have not sold, even if selling isn’t the best move. Unfortunately, watching a portfolio decline can create the feeling of never being able to make the money up in the future and may cause panic selling at inappropriate times. The one thing that people keep in mind is that it is human nature to respond more dramatically to losses than gains. In essence, the pain of losing money is much worse than the positive feeling of seeing gains.”

What is your advice for people to work through their anxiety because of the impact on the financial markets?

BF: “WASH. YOUR. HANDS. Aside from the obvious health benefits of clean hand, it is oddly therapeutic and calming. Breathe deeply and remember this too shall pass. It will be difficult for all of us, but we need to take this opportunity to help as much as we can, while making sure that we protect ourselves and our families. 

Stay connected. I try to do at least one personal FaceTime chat at day. Last weekend, I did a virtual happy hour with my elderly parents (safely in their home) in the Chicago suburbs, and my sister and brother-in-law in Denver. We had a couple drinks and dinner together. It was the first time we’d all “seen” each other since Thanksgiving, and it was great! 

Make sure you reach out to people who may be inordinately affected by this… first responders and their family in particular. This is hard on all of us, but it’s even harder on the people being called up to serve the sickest. Doctors, nurses, police officers, firefighters and EMTs, and people who are working other essential roles—they are all working their butts off out “there” so we can all stay “in here”

In addition, try not to spend more than 30 minutes a day on “news” update. I try to restrict my updates to when our Governor addresses the state each day. Beyond the fact that it creates some structure to otherwise unstructured days, it’s far too easy to spiral down a rabbit hole of confusing and misleading information. Listen to the experts and decision makers at a state level, as well as national experts - the CDC and NIAID, in particular. Personally, I think Dr. Fauci is the most reliable source of factual and measured information from a Federal level.

Stay as active as possible while adhering to social distancing guidelines. I live in Chicago, in a densely populated lakefront neighborhood, about a block from Lake Michigan…which is typically an amazing place to ride a bike or jog or take my dog to the beach when we aren’t in lock down. So, I try to jog up and back two blocks where I live (1/4 mile) multiple times a day. It keeps me local, and it means I won’t be exposed to many people outside of my neighborhood. Staying local and physical distancing is key.”

AS: Invest for the long term and don’t panic when markets occasionally crash. The market always recovers, but patience and a diversified portfolio are very important. The only investors who should feel any pressure to sell are those who have money in the stock market need to spend in the next five years. This is why it is important to have a diversified portfolio. Any spending needs in the next one to two years should be invested in money market or savings accounts. Spending needs in the next two to five years should be in bonds, CDs, or other conservative investments. 

When spending needs arise, it’s important to have access to funds that haven’t lost value, which is why owning conservative investments is imperative when markets fall. This allows investors to not worry about the stock portion of their portfolio when the markets go down, knowing they have five plus years for the market to recover, which in turn will allow the stocks to recover.

Also, try not to watch or read too much news, which could cause anxiety or panic. I believe the media tends to exaggerate and scare people because they want better ratings.  People tend to seek out information that supports their existing market belief, which creates the risk of ignoring facts that could help make smarter investment choices. In today’s digital society, algorithms on sites such as Facebook feed us information based on what we have already viewed. If you’re reading certain things in your social media feed, chances are you will be fed more things on that subject, but it’s not necessarily the whole story.”

As an organization, the AB Korkor Foundation is dedicated to providing the best possible resources, not only in the midst of this national pandemic, but also as we walk through whatever life throws at us. Stay tuned for Part 2 of this series when our experts give advice on scams to be aware of and who you can reach out to when you need trusted financial advice.