Use the Pandemic to Teach Finance Basics

It's easy to become paralyzed by fear and uncertainty as we attempt to re-start the world. It is challenging to shut off distractions, filter news reports, and think of moving forward with money decisions and retirement planning.

However, there are some important financial planning lessons to be gleaned from the pandemic. If your clients apply these solid, "old school" principles of wealth creation and preservation, they can emerge from the chaos in better shape than you might imagine.

Your clients can do four things to avoid losing ground planning for their ideal retirement during the pandemic and after it has faded away. Use these recommendations to help clients examine and reshape their future and their goals.

1. Establish and protect an emergency fund.

Many of my financial services colleagues have complained that their advice about saving for a rainy day usually falls on deaf ears. Well, thanks to the pandemic, this is no longer the case. People who found themselves jobless and locked down realized that the impact of a crisis is lessened when one is financially prepared. Those who had managed to save six months of living expenses fared far better than those caught flat-footed when lockdowns were announced. An emergency fund is not just a good idea- it's an absolute necessity in turbulent times.

2. Shift ideas about spending money.

For many folks, the global pandemic changed their ideas about spending. Homes and luxury goods that are difficult to afford even in good times create even more stress when jobs are cut or hours are reduced. I believe that the "lean and mean" mindset that many have adopted out of necessity will continue long after the virus has gone.

3. Think in terms of the long term.

COVID taught us that our economy is fragile in the short term but resilient in the long run. Even if your clients are only a few years away from retiring, they can still have a long-haul mindset. Instead of panicking, your clients need to partner with a trusted advisor like you to find ways to safely grow their wealth and protect it from erosive forces, such as increased taxation and inflation. Having a diversified and long-term approach to finances is key.

4. Prepare.

Emergency readiness is always a good idea. Many Americans live in areas prone to some kind of natural disaster. Having a few months' supplies of non-perishable food, toiletries, and other basics goes a long way in creating peace of mind.

As we saw during COVID when panic overtakes rational thought, shelf-emptying frenzy sets in. Forward-thinking people can have more peace of mind by accumulating reasonable supplies of food, water, and medicines in case they can't leave home for long periods of time. This isn't "hoarding," it's just good common sense.

The bottom line: While a constant barrage of bad news can be distracting, your clients need to bond with you as their trusted advisor. Make adjustments that they feel will maximize their returns or protect your wealth their when the economy stumbles. Clients should apply old-fashioned, time-tested principles to their retirement planning, resisting the urge to pivot too dramatically. Doing these things will help clients be more confident, in the future, and less likely to make mistakes with their money.

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 Tim Davis, CLU, CEBS, is president of Davis Capital Corp. in Katy, Texas.