June 12, 2020
About a week or so ago I received some troubling news from a second-generation client of mine, I’ll call him Jim, who said he had been temporarily laid off from his job at the hospital due to the impact of the COVID-19 pandemic. Jim’s a good family guy. He’s about 45, happily married with three teenagers. They live up in Plymouth where his wife Jenny, who is very active volunteering in the school system.
You know, it’s not the first time that I’ve had a client call me with news of a personal economic setback. While my heart sinks on a personal level when I hear this type of news, far from being the end of our relationship, it’s often the beginning of a new phase in our professional relationship. I’ve enjoyed some great moments in my career as I’ve watched clients reach their key financial goals. However, when I look back, I realize that in many of those cases, there were also setbacks along the way.
In terms of setbacks, other than the illness or death of a loved one, the loss of a job is one of the most significant. Our current economic and political environment means a lot of people are experiencing unexpected job losses, whether temporary or permanent, so it’s not a surprise that I had the call from Jim last week. Unfortunately, I anticipate there will be others until the economy opens up and begins its recovery.
During our phone call, we spent some time discussing Jim’s personal circumstances and how he felt about the situation. For him, it was a mix of fear and hopefulness. A substantial part of my job is pure listening so I can provide a personal approach to finances as well as the real-number outcomes we hope to achieve. It’s all about getting as close as we can to the solution we’re seeking, which requires us to eventually sift through the emotions and deal with the facts and probabilities that are in front of us.
The first part of our discussion centered around what was going to happen in the near term regarding his job. As of now, Jim has been temporarily furloughed. When we looked at what that meant, we came up with two potential outcomes. One possibility is that he, like many of others being laid-off right now, may find out that the job loss is permanent. Often times, jobs that are temporarily suspended at the beginning of a recession don’t return. On the other hand, there is still hope because of the sudden nature of this economic downturn. This recession is not the typical economic correction that addresses a fundamental unevenness in the economy. Instead, we’ve seen an outside event create broad hardships across society and the markets. The reason for some hope is that most of the job layoffs so far are considered temporary in nature. In fact, the last three post-World War II recessions with the most temporary layoffs had the quickest recoveries in the labor segment of the economy.
The second part of our discussion involved addressing a series of fact-finding queries regarding his specific job loss. Everyone who is laid-off needs to examine a specific set of questions: When will your company address whether the layoff is truly temporary or may possibly become permanent? Is there going to be a severance package? Am I entitled to unemployment compensation? What is my actual termination date? Are there other opportunities available in my company? What about non-compete agreements? Will I be assisted with outplacement? What happens with my health and retirement benefits? These and other questions provide valuable information and data about how you can address specific near-term issues associated with being laid-off.
Lastly, we talked about Jim’s financial system he currently has in place with us. Specifically, we considered potential adjustments he might make to his system. Some items we considered: Do we need to do any rebalancing within the portfolio? Can we make any near-term changes that provide an immediate positive impact but keep the long-range financial goals in place? Also of critical importance, we conducted some analysis around Jim’s investment timeframes, his current risk budget, and considered the potential effects of changes we might make.
You see, as with any sound financial system, there should be an interrelationship between the various goals and milestones. Changing one aspect of the plan can affects others. For example, there may be times when you have to choose between allocating funds to your child’s college savings versus your retirement income, or perhaps modify the amounts you apply to each to ensure you can still meet your daily living expenses. It’s also a good idea during a job layoff to set-up more frequent reviews with your advisor. The goal here is to evaluate how any changes you’ve made have actually impacted your plan to see if further changes are warranted. And of course, don’t forget to discuss your risk mitigation strategy for addressing down-side risk in your portfolio and whether or not that should be adjusted.
Folks, my conversation with Jim didn’t completely eliminate his fear about his current situation. But what it did do was reassure him that we have a toolkit to help manage the situation and move forward through it. You know, in times like these it can be impossible to completely eliminate fear, but we can manage it by asking the right questions that can help to make any necessary adjustments to your financial system.
So as always – be vigilant and stay alert, because you deserve more!
Have a great week.
Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, Mansfield & Southlake, TX. Jeff can be reached at firstname.lastname@example.org.
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