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Personal Finance Lessons From the Pandemic

Our writer entered the pandemic believing he was in good shape financially. Now, he says, he has a lot more to do.

Credit...Jing Wei

By Paul B. Brown

When you’re essentially confined to your house for weeks, you have a lot of time to think.

I thought most about preserving the health and safety of friends and family members. But soon I found myself obsessing about my own finances: Like so many others, I had a big problem.

As a freelance writer, I lost most of my income virtually overnight, putting me in the same situation as tens of millions of people whose paychecks vanished. Many people got government stimulus checks. I was not one of them.

Because I’ve followed the financial advice I’ve reported on for years, I wasn’t in terrible shape. I had an emergency fund and kept a respectable portion of my portfolio — about 35 percent — in medium-term bond mutual funds, which held up well while the stock market plummeted.

But now that things seem to be slowly inching toward normality, I am planning to learn from this crisis and do some major tweaking of my finances.

Here are the three things that are going to change:

The standard personal finance advice is to have at least three months of living expenses stashed away in something liquid and ultrasafe, “just in case.” That made sense to me long before the coronavirus began to spread.

But I didn’t pay a lot of attention to the money I threw sporadically into my emergency fund and I didn’t know how much I’d stashed there. Fortunately, when my phone stopped ringing and potential employers stopped answering my emails, I had more than four months of money squirreled away.

That was really good.

It was so important that I am going to try to get that number up to a year’s worth of reserves. (It’s going to take a while.) The goal is more to create peace of mind than to increase my net worth.

Yes, I know the money could earn more elsewhere than in the tax-free money-market fund where I am saving it. But, if I can help it, I never want to worry about meeting day-to-day expenses again. And if I end up enduring more than a year without earning much or any, income, it will be time to do something else — or, maybe, retire.

I’ve always paid off my full credit card balances each month, so I have never had credit card debt, not even back when the interest was deductible (The Tax Reform Act of 1986 did away with that.).

But I do have three mortgages: two (a conventional mortgage and a home-equity loan) on our house in New Jersey, plus another mortgage on our small house in Cape Cod. They add up to a big monthly nut, something I kept pondering during all the time I was stuck at home.

When income was coming in on a regular basis, I always paid more than I had to each month on each mortgage, because I considered prepaying a kind of forced savings. But I wasn’t particularly strategic about it. I just paid in random amounts, rounding up what was due. For example, if the mortgage payment was $3,772.16, I would write a check for $4,000, with the additional money going to pay down principal. I did that with all three loans.

The mortgages have different interest rates. From now on, I am going to put all extra payments toward the one with the highest interest rate, the home equity loan in New Jersey. That makes the most economic sense. (This assumes there will be enough money coming in to do this.)

Before the pandemic, I never really thought about my potential Social Security benefits. I remember playing golf with a buddy nearly four years ago, on the day I turned 62, and he said, “Congratulations, you can now take Social Security.”

When I got home, I went to the Social Security website and discovered if I applied for benefits immediately, I would get 75 percent of the benefits I would receive at age 66, my “full retirement age.”

I didn’t apply. There was no reason to. I didn’t need the money, and I hated the idea of taking a 25 percent haircut. So about 10 minutes after logging off the website, I forgot all about it. But during my long quasi lockdown, I realized that the money might come in handy, and I became curious about how much I might receive.

Well, if I can wait until age 66, which is right around the corner, I would receive about $3,000 a month, according to the retirement calculator on the Social Security website.

Even better, for every month I wait beyond age 66, the monthly benefit goes up 0.66 percent, which works out to be 8 percent a year. (For an excellent primer on how to how to think about applying for Social Security benefits today, see Mark Miller’s “Taking Social Security in the Pandemic: What to Know” which ran in The Times in April.)

  • Frequently Asked Questions

    Updated July 7, 2020

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • Is it harder to exercise while wearing a mask?

      A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.

    • I’ve heard about a treatment called dexamethasone. Does it work?

      The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.

    • What is pandemic paid leave?

      The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.

    • Does asymptomatic transmission of Covid-19 happen?

      So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • How does blood type influence coronavirus?

      A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.


Now, I am not going to be able to pay all my bills on the $3,000 a month I would receive from Social Security now, or even with the roughly $4,000 I would get if I delayed taking them until I turned 70. (There is no annual increase for delaying beyond that.)

But all this did trigger an interesting thought.

Suppose I quit work on the day I turn 67, a little more than a year from now. My monthly Social Security check would be an estimated $3,143 a month. And if I bought a $500,000 immediate annuity that started that day, I would receive another $2,612 a month, according to a projection, using current interest rates, from ImmediateAnnuities.com, an independent site that tracks these things.

That’s a combined $5,755 a month, or about $69,000 a year. That would cover my basics, and then some, in Cape Cod, where I plan to retire. And it would still leave me some retirement savings that, hopefully, could grow through investments in stock and bonds.

The numbers look a lot better if I don’t retire until I reach 70. Delaying Social Security until then would give me around $4,000 a month. And if I bought that $500,000 annuity in a few weeks, when I turn 66, and deferred taking payments until I turned 70, it would provide north of $3,400 a month, giving me nearly $89,000 a year.

I am going to keep playing with ways to combine my potential Social Security benefits with other ways to use my retirement savings to see what makes sense.

You never buy insurance because you hope to submit a claim someday. You do it to protect against a time when something awful may happen.

I have always thought of saving money the same way. While it would be nice to spend it on something that would give me pleasure, there really isn’t anything important that I don’t already have.

But the pandemic has made me realize that I’m not sure how much I’ll really need to have salted away to protect my family and to keep our solidly middle class standard of living intact, both now and into the future.

The crisis has made life much more challenging. But it has also strengthened my resolve.

Measure
Measure
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Summary | 14 Annotations
Personal Finance Lessons From the Pandemic
2020/07/11 18:57
But now that things seem to be slowly inching toward normality, I am planning to learn from this crisis and do some major tweaking of my finances
2020/07/11 18:59
I’ll try to keep even more cash on hand.
2020/07/11 18:59
The standard personal finance advice is to have at least three months of living expenses stashed away in something liquid and ultrasafe, “just in case.
2020/07/11 18:59
The goal is more to create peace of mind than to increase my net worth
2020/07/11 18:59
I’ll manage my debt more aggressively.
2020/07/11 19:00
From now on, I am going to put all extra payments toward the one with the highest interest rate, the home equity loan in New Jersey.
2020/07/11 19:00
Make a plan for Social Security benefits.
2020/07/11 19:00
But during my long quasi lockdown, I realized that the money might come in handy, and I became curious about how much I might receive
2020/07/11 19:01
Even better, for every month I wait beyond age 66, the monthly benefit goes up 0.66 percent, which works out to be 8 percent a year. (For an excellent primer on how to how to think about applying for Social Security benefits today, see Mark Miller’s “Taking Social Security in the Pandemic: What to Know” which ran in The Times in April.)
2020/07/11 19:01
I would receive from Social Security now, or even with the roughly $4,000 I would get if I delayed taking them until I turned 70.
2020/07/11 19:01
The numbers look a lot better if I don’t retire until I reach 70. Delaying Social Security until then would give me around $4,000 a month
2020/07/11 19:02
Why I need to save more.
2020/07/11 19:19
I have always thought of saving money the same way. While it would be nice to spend it on something that would give me pleasure, there really isn’t anything important that I don’t already have.
2020/07/11 19:19