Last updated on January 3rd, 2022 at 12:30 am
Time to stop worrying about what this virus thing has done to our wealth and the overall economy. Recessions have always opened the door to opportunities for those who can see past the current carnage we call our economy.
The Government is printing money
The government is printing money as fast as they can obtain the paper from China to do it (not sure where the paper comes from, it seems that nearly everything else does).
People who would never have taken “free” money are standing in line. That’s ok, I am sure they have had conversations with their great-grandchildren about how they are going to pay it back.
Everything seems to be political today even the virus. I will attempt to steer clear of anything smacking of democrat or republican in this blog. Before I move on, I have to take a swipe at those who just love to keep the economy on lockdown so the voters can take note of all of the free stuff and start liking it.
The free market is the only way to go
The free market is the only way to go and if it were not for the amazing wealth that had built up before the plague, things would be so bad that the lockdown would have been over in two weeks. Instead, the lockdown is draining all of the savings from the past four years. Time to move on.
If you are sitting around wondering what happened to your 401k or retirement funds that were invested in equities, join the club. I believe the average person lost about 40% at the bottom of the virus sell-off. The market is at about a 30% loss now. That is of course for people who were long-term investors and not those in the industry selling short positions.
You should have realized by now that the heard sold off much of their stocks and mutual funds some at a great loss. The smart strategy was and is to hold your positions. If you have owned your stocks for longer than a few years, you are probably in a position where an uptick of about 20% may put you into break-even territory.
Since the government will not allow you to declare losses experienced in your 401k or IRA, there is no need to sell for loss treatment. If you have a brokerage account, talk with your CPA about selling if you can use a deduction. Do not take this action without professional advice.
Hold on to your equities until the time is right
Ok, you understand to hold on to your wealth in the equities markets until things improve. Now let’s discuss real estate. The good news is that values are held in most markets. Do not pay any attention to articles that generalize real estate values or anything about real estate. Your market is not like other markets and will have its ups and downs apart from the next state or large area.
If you are planning to retire and move this may be a good time because more properties are coming on the market. There is still a general shortage of properties but as I have said, your market may be saturated with more properties than buyers or just the opposite.
Interest rates are, however, at record levels. Some of you remember when interest rates were 17% and people were buying. Assuming that you can get what you need from your home (need not the same as want) it/s a good time for sellers and buyers on the interest rate front.
Time to invest in Real Estate
Assuming that some readers will have access to cash without selling equities, buying a residential rental property is a good move today. Not in all markets but in those markets where prices are not inflated and rents are affordable. I suggest looking at the Mississippi Gulf Coast, check out the articles on this blog.
Time to talk about that 401k and IRA. Keep funding them as usual if you are working. If you have not already spent the free money you received from your elected official friends in Washington, invest it in your 401k. The idea here is averaging of invested capital. You invest now while prices are low to balance when they are high.
Actually, for those of you who never lost your income e.g most retired persons, this is a good time. You have been sheltering in place saving money on gas, eating out, and other pleasures. Put that money away for retirement.
Create a plan to recover
Just as the government is creating a recovery plan, you should as well incorporate some of the items included in this blog. Layout your financial situation and determine how you will gain back what you lost and even more. Start with the basics, how you will pay your bills.
Move to other parts of your plan such as paying down debt you have incurred during the COVID time if you were unemployed or lost value in the stock market. Read our blog article about a retirement budget. Use the tool provided to gain a picture of your entire financial situation. You need not be in a position to retire to use the budgeting tool. Click here
If you have lost some of your income and it was not replaced by unemployment (some are making more on unemployment than when they worked), focus on paying down those credit cards at the earliest possible time when you regain your job.
Some of our readers may have pushed back mortgage payments or rent payments. Work on those immediately after securing employment. Communication is the key, keep in touch with the people you owe money to. Do not let their computers ruin your life.
Follow-up with Creditors, Communication is key
What I mean is that regardless of what you have been told about paying back etc. the people who told you may not have told their computers. Watch your credit report. Assume nothing, take a very aggressive approach about keeping in touch and updating creditors about when you will pay it back.
Should you make an arrangement to pay back mortgage payments, ask if the lender will add them to the end of the loan or recast the loan. Most people never keep their loan for 30 years anyway so that part will just disappear in the closing when you sell your house.
Behind on Rent?
Landlords are another issue. Since I am a landlord this is good information for you. There are rules for landlords and tenants, these rules are often not written. They are part of our social bond. “I will pay your rent, you will maintain my apartment”. These obligations are part of the foundation of our society. This is why renters must pay their rent and on time. (read this blog article on rent)
When there is a legitimate reason why this can not be done, you contact the landlord and attempt to work something out. Let your landlord know when you will repay them. Work out a plan, do not wait for them to work out a plan, you present one that works for you and see what they say. You will have to repay this and perhaps a penalty similar to the one they would have to pay to be late.
Forget all of this nonsense about free stuff
There are lots of articles around about how people are going to get forgiveness for debt, all kinds of debt from student loans to rent they have not paid, and more. This is not going to happen. Everything is tied together. You fail to pay rent, your landlord fails to pay the mortgage, the bank forecloses then the renter is out of a place to live and the landlord has lost their retirement.
“Who pays for all that free stuff” (4/10/19 Ron Paul Liberty Report) Benjamin Franklin said that: “When the people find that they can vote themselves money that will herald the end of the republic.” How prescient and true. Once theft and redistribution by the government are considered acceptable, the downward spiral of civilization begins. It can last for decades or even centuries. But the result is always bankruptcy as countless factions ruthlessly fight with one another to be on the receiving end of the heist. When theft by the government is no longer considered acceptable, the upward march of civilization resumes.
The shareholders of the bank earn less which reduces the value of those 401k’s. It’s a myth that the stock market is disconnected from the average American. The stock market is us. We collectively own these companies through our savings. When a company is successful they pay dividends those dividends go to investors and you may be one through your retirement accounts.
Take personal responsibility for your future
Take personal responsibility for your actions regardless of how others treat you. Sorry for the lecture but it’s needed when so many in the media keep repeating what a few on congress and other politicians say that people should get a guaranteed income or not have to repay what they promised to pay.
We are in a recession and it should not last long. There are many opportunities to seize at this time for those who are not frozen in place with fear of the future. Those of us who have been through somewhat similar contractions in the past can attest that we always recover.
Here are a few cases in point. We recovered from WWI and the Spanish Flu which hit the country at the same time. The stock market crash of the 1920s is long forgotten and even WWII is fading most people’s memories. All significant challenges to our economy and we prevailed. Take the last episode with the housing crisis. The economy completely recovered in less than 10 years
A long list of people who have benefited from recessions
The list is long of those who have benefited from the valleys of the economy (Warren Buffet). There are bargains out there from stocks to real estate. The time to be so cautious that you are paralyzed is over. The stock market is creating a floor to propel upward. Many firms benefit from recessions.
New opportunities and industries will be created from our new normal. Think about something that you can contribute e.g. sell kits of things people need in confinement. Look around. when things get back to normal it will be a new normal with people looking for new things to acquire. The fitness industry has seen an uptick for example.
Be the first in your new endeavor. Companies that are the first into the market are the most successful in the long term. Perhaps this is time for you to start that new company making or selling something you believe will be in demand. Perhaps some service you can perform. Start part-time at home while you are working at your job.
Start a business
SBA loans are not difficult to obtain if you need start-up capital. Money is cheap now so this is a perfect time to obtain a business loan if you have a great idea. The SBA is also a great place to look for help in starting a business. Go to their section about business plans
I love the residential rental property as mentioned above. With a 20% downpayment, good credit, and interest rates for investors in the 4% range, the essential elements are there to get started.
How about that second home which can be rented when you are not there. Properties on the Mississippi Gulf Coast are affordable starting at less than $150,000.
Opportunities abound. Look around, read and investigate. Numerous websites can provide information about where to go from here. Thousands of people have improved their lives and saved for retirement because they took advantage of adversity. Consider this the bottom of the well. There is only one way out and that’s up. You need to find any way that makes sense to get out of the well. Time to think outside of the box as the old saying goes.
Take a personal assessment of your skills and talents. What on that list can lead to you improving your life? Now compare that list to what you see around you. This is not to say you should leave a good job that brings home the income you desire and supports your family. But for those of you who have been let go from your jobs, it’s time to rethink your future.
If you work for someone else and that’s fine, I have, you can do well. If you create something and start a business you can become wealthy. I recommend that you read other articles on this site and visit our affiliated site Keyladder.com for more blog articles about starting a business.
Don’t forget to complete the spreadsheet on planning for recovery. Please leave comments. Thank you for reading.
