Berks County Bar Association The Berks Barrister Summer 2020 - 14

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Wellness Wisdom

Restoring Your Financial
Fitness After a Pandemic

T

By Paul Marrella

he COVID-19 pandemic that we are experiencing is a
terrifying time. The medical uncertainty and the loss of
life have disrupted all of us and quickly spread into the
economy. While a recession has not officially been declared, we
can probably all agree that one is happening.

to budget, but this is a time when doing so is important. Your
budget should include debt payments (auto, mortgage, and credit
cards), taxes, utilities, and food. Today, there are currently not
many places to spend money because many stores, restaurants,
and entertainment venues are closed.

The COVID-19 pandemic is agonizingly unique. Few, if
any, saw it coming, and the pandemic has become a financial
and medical crisis almost overnight. This article focuses on the
pandemic's financial ramifications.

Hopefully, you have some "rainy day money" stashed away to
address your recurring expenses. In recessionary times, debt is one
of your greatest enemies. Debt payments do not stop when your
income declines or vanishes. You should plan for these upcoming
expenses by determining how much available money you have
and what you may need for the next few months.

Advising our wealth management clients has many parallels
to what each of you do every day. As I look back on my brief (but
valuable) legal career, it seems that 90 percent of my time was
spent solving people's problems, while the remaining 10 percent
was spent trying to avoid such problems from occurring in the
first place. Proper planning may have prevented many of those
problems. Managing wealth is much the same, whether you have
$10,000 or $10 million.
While recessions have different causes, they are a natural
part of our economic system. They occur periodically, but
without warning. Hence, trying to prepare now would be too
late. Proper planning begins at the end of the prior recession
and in preparation for the next one. You need to have the proper
mindset.
The first course of action is to get yourself through this
recession, learn from it and figure out how you can approach the
next one differently.
Let's think about what you can do during this fiscal fallout.
We will then discuss some basic planning concepts on how to get
your financial house in order.
What Can You Do Today?
One of the first things you may consider is to tighten the
purse strings, which means limiting spending to necessities. One
problem with recessions is that people reduce consumption and
stop spending. This results in businesses making less money,
which forces them to furlough or lay off employees; a vicious cycle
ensues.
Next, you need to evaluate your "fixed expenses" and
determine a budget. None of my clients (myself included) like
14 | Berks Barrister

You may also have access to government benefits, such as the
Coronavirus Aid, Relief, and Economic Security ("CARES")
Act's Paycheck Protection Program or other stimulus checks that
may help.
The recently passed CARES Act provides ways for employees
to withdraw money from their retirement plans and waives
certain IRS-imposed penalties. My recommendation is simple;
these should only be accessed as a last resort, which is easier said
than done. If you must access these funds, withdraw only the
absolute minimum required to sustain yourself.
Temporarily discontinuing retirement plan contributions is
another option, but if you do so, make sure you have a strategy to
restart them once your salary returns to normal.
While this advice might sound militant, you need to be both
diligent and relentless in managing your financial affairs during
these times.
How Do You Plan for the Future?
Preparing for the next recession is similar to surviving this
one. If you have not done so already, try to save a minimum of
three months' expenditures. That amount would allow you to fund
unexpected expenses without having to take on additional debt
such as those from credit cards.
Next, reduce debt! Credit cards are one of the worst forms
of debt, so get them paid off as quickly as possible. If you think
about it, credit cards simply allow you to spend more than you
earn. That is never a good thing.
In times like this, many people say, "I really wish I didn't have
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