15 Personal-Finance Lessons We Can All Learn From The Year Of Covid-19
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15 Personal-Finance Lessons We Can All Learn From The Year Of Covid-19

Among them: You really do have to plan for emergencies, and your personal-finance decisions don’t exist in a vacuum.

By WSJ Staff
Mon, Jan 25, 2021 1:07amGrey Clock 9 min

With 2020 in the rearview mirror, and the end of the pandemic (fingers crossed) in sight, there’s a lot of economic damage to be assessed. But there are also a lot of personal-finance lessons we can learn—lessons that will put us in good stead, whatever the economic future holds.

Lessons about the importance of emergency funds and having different income streams. Lessons about how this time really isn’t different (no matter how much it feels different). Lessons about how personal finance is truly personal. And much more.

These are some of the lessons we heard about when we asked financial advisers and others to reflect on the past year. It was a year, no doubt, that many people would prefer to forget. But before we try to wipe those memories clean, here are some of the things that investors, savers and spenders would do well to remember.

Emergencies do happen

One clear lesson from the past tumultuous year is that more Americans should work to build an emergency fund of at least one month of spending. An accessible emergency fund (kept in an easy-to-access form like a savings or checking account) can help alleviate the need for drastic cuts in spending when facing temporary shocks to your income.

While an emergency fund cannot make up for losing your job and facing long-term unemployment, it can help to reduce the impact of shorter-term economic disruptions. For instance, last year many households had members who were furloughed for several weeks while governments had mandated closures of their employers.

In addition, those facing longer-term unemployment often had to wait weeks for benefit checks to start to flow in. In such cases, having several weeks or more of accessible savings can reduce the need to undertake painful spending cuts or borrow at high interest rates to make required payments.

—Scott Baker, associate professor of finance at Kellogg School of Management at Northwestern University in Evanston, Ill.

We can be financially disciplined

The pandemic has taught us that financial discipline is possible. The restrictions on life’s pleasures, like travel and eating, caused all of us to rethink how much we spend on these activities. We reflected on our excess indulges and realized the value of spending moderately and saving intentionally.

Building cash reserves from unspent money on niceties sparked greater confidence in handling life’s shocks. Many of us appreciated the extra money to weather job loss, reduced income due to cutbacks or caregiving responsibilities, and mounting medical bills.

We also start thinking more about how we should spend our money, whether it was because of sheer boredom or a greater appreciation of life in the midst of constant Covid-related casualties. Life’s experiences often serve as the catalyst for changing financial habits and mind-sets.

—Lazetta Rainey Braxton, co-CEO of 2050 Wealth Partners, New York

Buy when others are scared

The best time to invest is when others are fearful. In 2020, we faced risks unlike any we’ve dealt with in our lifetimes. Being told you’re in danger triggers all your evolutionary defence mechanisms intended to keep you safe. Unfortunately, none of these instinctive reactions is useful in the arena of long-term investing. In March, investors’ fears extended well beyond their portfolios and into their personal well-being.

It’s common to hear “this time is different,” but there are two things that tend to remain true of all bear markets. First, buying when the market is down at least 30% has historically been an excellent entry point for stocks. Buying stocks in March required you to embrace fear and uncertainty in exchange for the higher expected returns.

Second, while all bear markets are inherently different, the common thread is that they always end. Investors must be willing to lose money on occasion—sometimes a lot of money—to earn the average long-term return that attracts most people to stocks in the first place. And if you can be a buyer in times of fear, your chances of earning above-average returns improve.

—Peter Lazaroff, chief investment officer at Plancorp, St. Louis

Manage your risks

The biggest personal-finance lesson from 2020 is the importance of comprehending and managing risk. Unfortunately, this is one of the concepts of personal finance where knowledge is lowest, according to the TIAA Institute-GFLEC Personal Finance Index. While risk is a constant in our life, we often do not insure enough against the risks we face.

We should ask ourselves: Does my family have the proper coverage in case of health problems, including the ones created by the virus? And in case we have a high-deductible health plan, do we have enough to cover the deductible? And are we covered in case someone becomes disabled? Should we change or increase our long-term disability insurance? And importantly, do we have life insurance to protect our family in case of the death of the income earner(s)?

These are difficult questions to confront and ask, but the pandemic is a good reminder that it is better to be safe than sorry.

—Annamaria Lusardi, university professor at George Washington University in Washington, D.C.

You need a will

There has never been a better time to put front and centre the need for every adult to have a will. No one expected the level of tragedy that occurred world-wide last year. And people don’t want to think about the idea of dying one day—a reason why they often kick this can down the road. But a big lesson of 2020 is that you should be prepared for the worst.

Whether you’ve built a net worth like Tony Hsieh, former CEO of Zappos (who had no will) or you are worth $10,000, it’s important for the family you leave behind to understand the wishes you have for your assets and belongings. It’s also important to check your beneficiary designations. If you have life insurance, a 401(k) or an IRA, they are a contract of law and will go to that named beneficiary, whether or not you have a will. People often forget to update or change those beneficiaries.

—Ted Jenkin, co-CEO and founder of oXYGen Financial in Alpharetta, Ga.

Your personal finances reflect your values

The events of 2020 reminded people of the foundational reasons behind their financial life—their “why.” Many people have reconnected personal finances with the things most important to them: how they use their time, how their money fuels their family and home life, what their investments support and fund, and how their careers enrich their lives. Personal finance does not exist in a vacuum; it exists in light of what we value most.

Last year has reminded people of what they value and has also helped identify what is not important. For many people, it’s that all the details around finance and money should come back to a core purpose—facilitating the lives that we all want to live. That has real-world impact on the decisions we make about how we derive income, how we spend our resources and how we invest.

—Jared B. Snider, partner and senior wealth adviser at Exencial Wealth Advisors in Oklahoma City, Okla.


Retirement plans need flexibility

The Covid-19 pandemic has left more Americans feeling the need to delay their retirement as both a short-term and long-term financial fix. And that is a wake-up call for many would-be retirees about the importance of not having retirement plans and expectations set in stone.

A whopping 81 million Americans reported that their retirement timing has been impacted by the pandemic, with most believing that they will need to work longer than they had previously planned, according to a survey on work and retirement attitudes and expectations that my firm, Age Wave, has just conducted in partnership with Edward Jones. Most are putting off retirement for an average of about three years, according to the survey.

For many Americans, a few extra years of work can offer a financial buffer. It also can provide continuing social connections, mental stimulation and contribute to a sense of purpose—which, for many people, can be a silver lining after this difficult year.

—Maddy Dychtwald, co-founder of Age Wave, a think tank and consultancy in the San Francisco Bay Area

Things won’t stay bad—or good—forever

Extrapolating the recent past too far into the future is a big mistake. This is known as recency bias, and it is one of our biggest downfalls as humans. Last year taught us a powerful lesson, in both directions.

Optimism was the order of the day early in 2020 with the market making all-time highs. Compare that with March, when things looked like they would never recover. In both cases, investors would have been well-served not to assume the recent past was going to continue forever. Many investors we spoke with in March wanted to make dramatic changes to their investments because they were assuming things would continue to get worse.

This is why a diversified portfolio that you can stick with regardless of the market environment should be the cornerstone of almost everyone’s investment strategy.

—Jeff Mills, chief investment officer of Bryn Mawr Trust in Berwyn, Pa.

This time is different. Not.

It is always nerve-racking to watch the market go through a sizable correction as investors find it increasingly hard to differentiate the economic ramifications versus the results created by the media. When the downturn is caused by a pandemic, it adds another layer of complexity to the confusion. The brain says, “This time is different.”

The truth is that each recession is different, but the discipline which investors adopt to manage their portfolios should remain intact. Investors with proper asset-allocation discipline that incorporates liquidity strategy should refrain from giving orders to their advisers when the noise grows to become overwhelming. Selling orders out of despair led to liquidating at the bottom in March and missing the unpredictable quick rebound in April and beyond. The unprecedented global pandemic sweep was met with the unprecedented speed of monetary and fiscal policy adjustments and the fastest vaccine development witnessed. It was evident that the market worked itself out.

This time is no different from any other time. It’s time in the market rather than timing the market that matters in the long run.

—Jessica Guo, financial adviser and senior portfolio manager/international wealth management adviser at UBS and founder of Guo Group in Wellesley, Mass.

Markets always fool us

It was the year of Covid-19, skyrocketing unemployment, a shrinking economy, a $3.3 trillion ballooning of the U.S. budget deficit, racial riots, heated political discourse. Yet, rather than plunging, the U.S. stock market responded by surging about 20%, as measured by the total return of the Wilshire 5000 Total Market Index. What gives?

In the 33 days between Feb. 19 and March 23, when the pandemic gained its foothold in the U.S., domestic stocks plunged nearly 35%. Many people told me stocks would not recover until we had a vaccine. Even some people who realized the phrase “this time is different” was the costliest phrase in investing told me, “This time really is different.” (Admittedly, if going into the year I had known what was going to hit us, I’d have bailed on stocks.)

Why did stocks recover and soar in the wake of such horrible economic news? The weaker explanation is that the decline in future corporate cash flows was less than the reduction in the discount rate used to value those stocks. This was caused by plunging and now near-zero interest rates. The much stronger explanation is simply that the stock market continues to fool us.

Lesson learned: If we can’t even explain the past, just think how futile it is to try to predict the market’s future.

—Allan Roth, founder of Wealth Logic in Colorado Springs, Colo.

You should have a three-bucket strategy

The Covid-19 recession has proved once again that every investor should always have an investment plan and strategy that can weather events such as what we have experienced.

A three-bucket strategy is a wise approach as investors rethink how they should invest their money. A short-term bucket should have one to two years of expenses in short-term instruments such as cash or short duration bonds. An intermediate-term bucket should be for monies not needed for two to five years, such as core bond funds. A long-term bucket should consist of money not needed for at least five years and can be invested in equities. This approach will prepare investors for any short-term risks that arise, such as coronavirus-related recessions, without sacrificing the integrity of their portfolio.

—Brian Walsh Jr., senior financial adviser at Walsh & Nicholson Financial Group in Wayne, Pa.

Rebalancing pays off

Rebalance your portfolio when market movements cause your equity mix to stray from your target percentage. Doing this—buying more equities when under target or selling when they are above—is a good way to buy low or sell high.

In most years, rebalancing helps your portfolio’s return by a percentage point or two. Once in a while, it can double or triple this when equity markets decline steeply and recover, like during the 2007-09 recession. There hasn’t been such an outsize rebalancing opportunity until last winter when the pandemic hit.

However, you won’t realize these benefits unless you actually do the rebalancing. Otherwise, all you will realize is your fear of missing out when markets do eventually turn.

—Jonathan Guyton, principal at Cornerstone Wealth Advisors Inc. in Minneapolis

Stay invested

Last year’s tumultuous market reinforced the importance of staying invested. It looked like financial markets were doomed near the end of the first quarter. We saw days where markets went down over 10%. Many investors panicked and went cash fearing the worst. Since then, the markets have rallied and anyone who tried to time the market and go more conservative is probably feeling a bit of regret.

—David Blanchett, head of retirement research at Morningstar Investment Management in Lexington, Ky.

Have a side gig

Just as investment advisers recommend having a mix of investments in your 401(k) to minimize stock-market risk, it’s critical to have a mix of income sources. Many global citizens took the pandemic as a call to action and used technology to create new income streams through blogging, selling courses, writing e-books, posting video content, coaching or consulting, setting up an online shop, investing and so much more. In the 21st century when the majority of transactions occur digitally via the web, technological literacy is as critical as financial literacy.

—Yanely Espinal, director of education outreach at Next Gen Personal Finance in New York

Yes, bonds are still important

Many investors are quick to dismiss bonds given their historically low yields. However, the events of the past year have reinforced the importance of including fixed income within one’s portfolio.

When Covid-19 first hit, from mid-February to the end of March, the S&P 500 plummeted 34%. A diversified portfolio of equities and fixed income outperformed the broad stock market during the scariest times of the year. The stabilizing bond exposure helped many investors stay the course and minimize emotional selling during this time.

Having bond exposure in early March also provided investors with a wonderful rebalancing opportunity. As investment-grade bonds significantly outperformed the market, investors could use proceeds from selling bonds that stayed flat or appreciated in value to buy stocks that were trading at a discount from just a few weeks earlier.

Additionally, bond exposure helped the many Americans who had to liquidate investment assets to meet their cash-flow needs as employees were laid off or furloughed from their jobs during the year’s quarantine. Selling their bonds provided a more stable cushion for many investors. Being forced to sell stocks at rock-bottom prices instead could have had a devastating impact on their finances.

—Jonathan I. Shenkman, a financial adviser at Oppenheimer & Co. in New York


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The Middle East is set to be the fastest-growing marketing region in the world, driven by momentum in countries such as Saudi Arabia

Tue, Jun 18, 2024 5 min

Saudi Arabia’s fledgling advertising industry and continued growth in the sector in the United Arab Emirates are helping to make the marketing business in the Middle East the fastest-growing in the world.

Ad spending in the Middle East is projected to increase 8.1% to $6.6 billion this year, up from 3.5% last year, according to advertising research firm WARC.

That expansion is building from a much smaller base than in many other ad markets. The Netherlands alone will generate $6 billion in ad spending in 2024, up about 2.3%, WARC said. But it is also enough to outpace every other region in 2024, the firm said.

“It reminds me almost of the gold rush,” said Reda Raad , chief executive of TBWA\Raad Group, an ad agency based in Dubai, in the United Arab Emirates, that is part of the U.S.-based ad holding company Omnicom Group . “I don’t think we’re going to see this type of growth again in our lifetime.” TBWA\Raad has won eight new clients over the past year, with an increase in head count of 17% to accommodate the new work, Raad said.

Some international brands have long maintained a presence in the region. PepsiCo has considered the area a strategic market for decades, said Karim Elfiqi , senior vice president and chief marketing officer at PepsiCo Africa, Middle East and South Asia. Sponsorship deals with local stars such as Mohamed Salah , a soccer player from Egypt, “are a testimony of how over time, we have been part of the cultural fabric of the region,” Elfiqi said.

Other major brands have formed a more recent focus on the Middle East. The Lego Group opened a Middle East and Africa headquarters in Dubai in 2019, citing the size of the region’s young population. That office has developed work such as a Ramadan-themed campaign that ran in the U.A.E. and Saudi Arabia, among other locations.

‘Massive growth’

The Middle East’s ad market has lagged behind regions such as North America and Europe partly because of stricter cultural norms and regulations that affected business, as did a more limited media landscape and economic instability, according to Raad.

But marketing growth in the region is now being driven in part by newfound marketing interest in Saudi Arabia, where ad spending this year is expected to reach $2.1 billion, nearly double its level in 2019, according to WARC. Growth is also coming from the U.A.E., whose ad market is expected to reach $1.7 billion in 2024. Smaller contributors include Qatar and Kuwait.

The landscape has changed now because of economic diversification, increased connectivity and a move into the digital world, leading international brands to enter and invest in campaigns tailored to the region, Raad said.

Four years ago, Saudi Arabia made up a small proportion of business at Lightblue, a creative experience and tech agency based in Dubai. These days, 40% of its business comes from the country, says co-founder David Balfour , who opened an office in Riyadh last month as a result.

“The conversation used to be, ‘We’re going to do this in Dubai.’ Now, it’s ‘We’re going to do this in Dubai—and in Saudi.’” Balfour said. “We’re seeing massive growth in that region.”

There have been speed bumps. As government spending reaches huge levels , Saudi Arabia experienced a rare economic contraction in 2023.

But the country’s efforts to expand its economic pursuits beyond oil have led to the creation of new brands, which are seeking the help of marketing agencies to get the word out.

Marketers in the region are seeking help to stay on-trend in areas such as generative artificial intelligence and social media, said Greg Paull , principal of R3, a consulting firm that helps match advertisers with agencies.

“U.A.E. has been a magnet for the region for 20 years as more investment has come in—but with the new leadership in Saudi since 2017 [when Mohammed bin Salman was named crown prince ], this market has gone through remarkable growth,” Paull said.

Saudi Arabia has faced criticism for its human-rights record under the crown prince, the day-to-day ruler of the kingdom, especially over the 2018 killing of dissident journalist Jamal Khashoggi and the more recent jailing of women’s rights activists.

Mohammed has outlasted the international isolation that followed Khashoggi’s killing, however, and continues to pursue an economic diversification plan dubbed Vision 2030. The country last year unveiled plans for a new international airline called Riyadh Air, is investing billions of dollars to build its tourism and video game industries, and in March hosted a golf tournament in Jeddah under the auspices of LIV Golf, the Saudi-backed league that has both challenged the PGA Tour and struck a deal to unify with it.

Changing tides

Vision 2030 also calls women’s empowerment a top social priority and seeks to increase the country’s employment rate of women.

Nada Hakeem , CEO and co-founder of Saudi creative agency Wetheloft, said the perceptions of hardships for women in the marketing and advertising industry are outdated and inaccurate.

“As a Saudi woman who founded my company in 2012, I’ve always felt supported by the creative community and the industry as a whole,” Hakeem said. “While every society may have its challenges, I can confidently say that these challenges have not hindered our growth.”

A progression of new laws, policies and incentives are making the industry in Saudi Arabia more inclusive and supportive for women, she added.

In certain parts of the Middle East, “absolutely, it’s still challenging, but they are making the right strides, and they have the right quotas and ambitions in place,” said Rebecca Bezzina , CEO for the EMEA region at R/GA, an agency owned by Interpublic Group of Cos.

“They’ve got wealth, they’ve got world-class ambition, world-class budget. They’re not shy of doing things in the right way,” Bezzina added, speaking of the region overall. “But they still have a talent shortage, especially from a creative and design and product point of view. So often what we’ve found our success has been that they’ve come to us and said, ‘Oh, we want a world-class agency to help us launch this new venture or do this new brand.’”

R/GA said it sees 69% more requests for agency work from marketers in the region today than it did five years ago. It recently handled a brand redesign for Banque Saudi Fransi, which wanted to reaffirm its Saudi roots with a modern identity, and created Weyay, the brand for a new digital bank from the National Bank of Kuwait.

The agency hasn’t notably increased its regional workforce, but it has made changes to facilitate working across Europe and the Middle East.

Other Western players are making moves to capture a piece of the growth. Advertising giant WPP has long worked in Saudi Arabia through units such as Ogilvy and GroupM, but in 2021 established a joint venture with a local company to create ICG Saudi Arabia, a communications and media company based in Saudi Arabia. Ad holding company Stagwell opened new offices for its media agency Assembly in Riyadh in 2021 and in Cairo in 2022.

Regional hospitality

Some executives said certain facets of business dealings in the Middle East are different than in other parts of the world.

Bertrand Morin, a group account director for R/GA who is based in London and works often with Middle Eastern clients, said he spends much more time speaking about personal lives and families with those clients than those in the U.K. or U.S. He has been invited to Middle Eastern clients’ homes to join their families for dinner, something that has never happened with clients elsewhere.

But others say it can feel surprisingly familiar.

Balfour, the Lightblue co-founder, said he was struck by the number of ad-agency workers recently having dinner at the Riyadh location of steakhouse chain Beefbar, and the scene’s similarity to far-off locations.

“The staff are from everywhere in the world. The service and the food is unbelievable. There’s a DJ playing,” Balfour said. “Apart from not having alcohol, you could be anywhere in the world.”