We are coming off the worst quarter for stocks in history.
Let that sink in for a moment. The first quarter of 2020 was literally the worst showing for stocks ever, with the Dow Jones Industrial Average plunging 6,621 points or 23.2%. The S&P 500 did slightly better, sinking 646 points, or “just” 20%. The NASDAQ Composite held up the best of the big three, but it still plummeted 1,273 points or 14.2%.
Unfortunately, the market numbers aren’t the worst damage caused by the coronavirus. The worst damage is going to be to the economy, as a virtual shutdown of commerce in the United States and throughout most of the world will undoubtedly send us into a recession. How long we stay there will depend upon one key thing, which is how fast we can bring the rate of new coronavirus cases down.
According to the experts, we could be in for some extremely tough weeks ahead. This is true in terms of both new cases, and sadly, the national death toll. To try to “flatten the curve” of coronavirus cases, and therefore to reduce the number of future deaths, the country is going to continue its current “stay at home” policies. Even President Trump has signed on to the extension of these guidelines until the end of April.
Given the situation, the economy isn’t likely to get better for at least the next month. Now is the time for you to take any and all necessary action to help yourself survive this coronavirus financial crisis.
To help you do that, I’ve enlisted my friend, real estate and personal finance expert, and host of the popular show Unlock Your Wealth Today, Heather Wagenhals.
I always learn things from Heather, as she is a fountainhead of information when it comes to uncovering useful tips to help people improve their financial lives. So, today I asked her to help me put a few tips together to help The Deep Woods readers prevail during this time of acute financial stress. I think you’ll find her insights extremely useful.
Heather Wagenhals and Jim Woods at FreedomFest 2019
Jim Woods (JW): Given the tremendous economic uncertainty caused by this pandemic, what options do individuals have to mitigate financial risk and endure the coming months of potential hardship? More specifically, what’s the first thing you recommend individuals and/or business owners do right now to create some relief?
Heather Wagenhals (HW): Forbearance is always at the top of my list to create instant relief of financial headaches and give some “financial breathing room” when there is an income reduction or interruption. This is simply a written agreement between the borrower and the lender to move a negotiated number of payments to the end of a financial obligation, eliminating the need for required installment payments now, and preserving your credit rating integrity. Another term this process may be known by is payment deferment. It doesn’t eliminate your monthly financial obligation; it just moves the obligation to the end of your loan term.
JW: Can you give us an example of how forbearance works in practice?
HW: Certainly. Let’s say you have a monthly payment on some debt of $100, and you negotiate with your lender for a six-month forbearance (traditionally the standard). You will then resume your standard monthly payment after the forbearance term. Then when your final $100 payment is due, you will also pay that deferred $600 and any other charges due at that time. I encourage everyone to ask for the max forbearance available because we don’t know how long this coronavirus will keep our nation in economic lockdown.
JW: What is your second recommended action to take to create financial relief?
HW: The second step is to evaluate ongoing expenses. We need to keep in mind that we are in a crisis, and while we have been inconvenienced, ideally this is not a change in our way of life or something long term. That means we want to err on the side of judicious versus drastic. The things we want to look at are what expenditures have fallen outside of the “essential need business” definition. If we don’t have access to utilize memberships such as health clubs/spas, golf or tennis memberships, tanning, recreational clubs, social clubs, etc., and those organizations haven’t voluntarily suspended membership dues, you can always request to “freeze” those memberships, preserving your inclusion when you are able to return to those activities and freeing up additional cash resources now. Often, it’s already spelled out in your member agreements that you can reference for specific instructions.
JW: That’s a great idea. I know I have some memberships I am not even allowed to use right now that I should make sure and suspend. So, how about resources available to homeowners, aside from requesting a forbearance? Are you a fan of refinancing your existing mortgage right now?
HW: Homeowners definitely have options open to them right now. In fact, streamlining your mortgage is an excellent way to reduce your monthly mortgage expenditure if you’ve been in your home for a while. The technical term is called mortgage re-casting or mortgage re-amortization. If you’ve been making additional principal payments, made a lump sum principal payment, or have been in your property a number of years and paid down a fair portion of your principal, you can have your lender recalculate your mortgage based on the new principal balance.
As for refinancing, the challenge individuals will have right now with refinancing is that first, it requires a new underwriting determination for the lender during a period where lending guidelines are becoming stricter. Second, it’s going to require you to qualify, and if you have had an income reduction or a material change in your job or company’s status (like being labeled as a “nonessential business” and forced to close therefore eliminating your income stream) you may not qualify, or you may not have as favorable terms as you do now. Finally, refinancing costs money. You will have to pay origination fees, title and escrow fees and multiple other fees. When you streamline your mortgage it’s not a new underwriting decision for the lender, so if you’ve had great payment history it’s simply recalculating the interest and likely a small documentation fee right around $300 if any is required.
JW: Outstanding. Finally, are there any other tips, tactics or resources my readers can access in your financial survival tool kit?
HW: I always say that any time is a good time to ask for an interest rate reduction for any accounts you have. And in a crisis, such as the one we are experiencing now, this is a great time to save some money and be rewarded for your excellent payment history. You’d be surprised to find out how many people are not aware that you can renegotiate your annual interest rates and fees charged on your credit cards and revolving credit lines. The better your high-balance management and good payment history are with a lender and/or card issuer is, the greater likelihood you will have of getting that rate reduction with the first level of customer service representative you encounter.
JW: Thank you for sharing some of your insights with my readers. Anything else you’d like to share before we wrap it up?
HW: You’re welcome, Jim. It’s an honor to collaborate with you. And, I do have some final words. Keep in mind this is a trying time for everyone. Call centers are having employees work from home and hold times are extended. That means that remaining calm before and during your negotiations is essential. As you wrote about in your recent article “Make the Coronavirus Kindness Choice,” I think it’s important to lead with kindness, but also to remain assertive and to keep asking questions. You also should continue to escalate your requests to the next level of customer service representative until you get what you are seeking. Those extra minutes invested in patience and kindness may equate to hundreds of dollars in savings for you.
JW: Excellent advice. Thank you so much, Heather. And with some smart thinking, sound planning, a positive attitude and a focus on making the kindness choice, we’ll all come out of this mess stronger and better equipped to deal with adversity than we were before this crisis.
P.S. Do you know precisely when to sell your stocks? We do, because we have a plan in place to tell us when to buy — and more importantly — when to sell our positions. That plan is the proven, four-decade-plus trend-following strategy at the core of my Successful Investing advisory service.
If you want to make sure you have our proprietary “Safety Switch” in place that tells you when this market should be sold, and when it’s safe to get back into the market after you sell, then you simply must check out my Successful Investing advisory service, today.
Viewing the World with Healthy Skepticism
I’ve always believed that it’s important to engage the world with an objective, scientific mindset that is always skeptical of truth claims that don’t pass rigorous intellectual muster.
Helping the world see things from that perspective is Michael Shermer, founding publisher of Skeptic magazine, host of the Science Salon Podcast, and a Presidential Fellow at Chapman University where he teaches Skepticism 101.
In the latest episode of the Way of the Renaissance Man podcast, Michael tells me about how he created his “non-traditional career” as a writer, publisher and critical thinking advocate.
In addition to becoming the world’s point man in the battle to cultivate healthy scientific skepticism, Michael also spent more than a decade as a professional bicycle racer, which basically vaults him directly into Renaissance Man status.
In this episode, we also discuss the history of science, the rise of postmodernist thinking, the current assault on truth, the changing nature of politics and the downside of using labels to categorize people.
I’ve been an admirer of Michael Shermer for some time and, in this podcast, you’ll discover why.
Make the Coronavirus Kindness Choice, an Audio Essay
In a recent issue, our lead story was about how you can “Make the Coronavirus Kindness Choice.”
This story was well-received, and I want to thank those who wrote in to tell me they found it valuable.
Given the nature of the topic, as well as its timeliness, I decided to do a special audio essay version of the article for those who enjoy listening to content.
This audio essay is a slightly edited version of the original piece that was published March 18 in this column.
So, if you are someone who enjoys listening to audiobooks, podcasts, etc., I think you’ll like this special audio essay version of “Make the Coronavirus Kindness Choice.”
Fighting A Dark Cloud
Well there’s a dark cloud rising from the desert floor
I packed my bags and I’m heading straight into the storm
Gonna be a twister to blow everything down
That ain’t got the faith to stand its ground…
–Bruce Springsteen, “The Promised Land”
A viral dark cloud has risen from the desert floor and become a global pandemic. Yet for the world to fight it, we have to go straight into the storm with a combination of science, smart social practices and faith in the goodness of our fellow humans. Together, we will prevail, because that is what the human spirit does. So, make sure you cultivate the best within you, and keep sharing that spirit with your fellow man.
Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.
In the name of the best within us,