It’s been a wild last twenty-eight years. Oh wait, did I just say it’s been a lifetime? My mistake, but honestly that’s about how long the last 1-2 months has felt ever since the COVID-19 threat started to get taken seriously in the US and the area I live in.
My fiancée and I have been sheltered in place for the past month, and both feel extremely fortunate to have jobs that can be worked remotely. While the set up hasn’t been ideal, (we didn’t think we’d both be working from home for an extended period when we chose our 1 bed/1 bath, 600 sq ft basement apartment!) we are making the best of the situation and enjoying the extended time we get to spend with each other especially after recently getting engaged!
While we’ve gotten used to the set up, and mentally prepared to be doing this for an extended period, it’s certainly been an adjustment. One good news item is that I’ve shown my boss I can perform my job 100% remotely and don’t need to be in the office to perform high quality work. I even worked up the courage to ask her straight up if I could work this position remotely full time if my fiancée and I were to move from DC in the summer… and she said yes! It’s great to have this option, but given the state of the economy, we’re still debating what our next move will be. That’s to be answered in a future post I suppose 🙂
While I’ve wanted to write a post for some time now, for some reason it just hasn’t felt right. Who am I to talk about money when the world is on fire? People are dying, millions have lost jobs, the stock market is tanking, etc. I’m a young, healthy person with a stable job and in a good spot financially. It just hasn’t felt right to be posting about money at a time with so much suffering.
But I need to face the reality as well. Nobody knows how long this thing is going to last. We could be dealing with this virus off and on for a long time. We could be headed for an economic recession which could also last an extended period. Am I just not going to write a post for a year or longer just because there are bad things going on in the world?
I’d like to think there are still some important things, lessons learned and ideas I can share with the world, even during a crisis of this magnitude. This post is just a “re-entry” of sorts and recaps some of the money moves I’ve made during the market craziness, as well as the shift in my strategy going forward to weather a potential extended downturn.
Shifting Financial Strategy
The COVID-19 panic, and subsequent market crash has left me reconsidering what my financial strategy will be going forward. While I had planned to make a big move and invest (in the market or a rental property) all that extra cash I have sitting around, it may seem more prudent to keep that around for the time being given the economic uncertainty.
Nobody really knows how bad this downturn will be and whether the fiscal and monetary policies enacted by the government and Federal Reserve will be enough to save us from a bad recession. While most forecasts show a return to normal growth by year end, it’s all just a guess and assumes things return to normal by summer. With millions out of jobs and likely in a tough financial situation, I just find it hard to imagine things just all of a sudden return to normal. Perhaps it’s a pessimistic view, but I’m not quite convinced we’re in the clear and will get back to “normal” anytime soon.
I certainly hope I am proven wrong though!
While I had saved up over $30K in cash for a potential rental property down payment, that is now serving as quite an emergency fund to make me feel much more secure during these uncertain times. It could easily cover a year’s worth of expenses were I to lose my job (especially if I moved out of DC to a lower cost of living area).
I do think my job is very secure and the likelihood of getting laid off is very low but I’m sure there are many others out there who thought the same thing and now find themselves without pay or unable to work. I’m not taking anything for granted here.
In addition, there’s not just me to think about. My partner and I are a team, and even though we haven’t officially combined finances, we’re moving towards that. Thus, of course we would need to consider our overall situation as part of our strategy going forward as well.
I’m lucky that she is also a rockstar with her finances and she is also well prepared for anything to happen. If either one of us were to lose our jobs (or both of us), we would be covered for an extended period which is very reassuring.
I’ll be monitoring the situation and act accordingly, but I’m certainly in no rush to part ways with my cash cushion until we get a better sense on how this plays out.
Money Moves During COVID-19
Just because I’m playing it safe doesn’t mean I’m sitting on the sidelines during this craziness. In fact, during the market plunge from mid-February to mid-March in which the S&P 500 dropped nearly 35%, I was fairly active in sporadically investing some of that cash into my Roth IRA, as well as transferring some of the bonds I was holding in my portfolio back into stocks.
Even though the market has lost quite a bit of value, I personally have not lost any money yet. This is because I haven’t sold any stocks! This is something worth remembering: you haven’t lost any money until you actually sell your investment. By investing for the long term and ignoring the short term volatility, you give your investments time to recoup their losses and return to or exceed their previous highs.
This was my first foray and experience into a sudden, intense market drop. I wasn’t really sure how I would react to it. It’s easy to listen to podcasts and read blog posts on how to act during a recession or downturn, but it’s another thing completely to live through one.
I didn’t really have a strategy either. Essentially, I just invested a little bit each time I saw a big market drop. There were a few days of 7% or larger drops in the market and I threw some more money in each time.
I already mentioned in February that I had transferred the $3,000 in bonds in my Roth IRA back into VTSAX (Vanguard Total Stock Market index fund). This was done sporadically as I transferred it over in 3 separate increments.
I did the same with investing $5,000 cash (of the $6,000 2020 contribution maximum) into VTSAX in my Roth IRA. This too was done sporadically over 3 separate contributions. Each time I bought a bit lower (with the final one coming on March 23rd – the current “bottom” of the market – though we’ll see if that holds).
Lastly – I also transferred half (~$5,000) of the bonds I held in my 401K into VITPX (the institutional shares of VTSAX). I did this is one transaction, as my 401K has limits on how many transactions I can do. This was also after a large drop in mid March – but not quite at the exact bottom.
While I’m not trying to time the market at all, I’m being patient with any other money moves, especially after the market has seemingly staged a comeback and risen out of bear market territory.
With a new raise that just went into effect in April, and an emergency fund that is already fully stocked, I’m considering starting up weekly automatic contributions to my Brokerage account. This way I can contribute a set amount each week and dollar cost average my investments for the foreseeable future.
It would also remove the temptation to try and time the market for that perfect opportunity. I’m not that good, and quite frankly I have better things to do with my time than pay attention to the whims of the market. It’s certainly not the sexy approach, where I might find the next great stock at a bargain price, but this approach will work for me. And besides, sometimes the simple path to investing can be a great approach too.
So there you have it. These have been my money moves so far throughout the last few wild months, though I’m sure there will be lots more action to come.
What money moves have you made so far during the downturn? Are you changing up your financial strategy at all?