The Coronavirus Aid, Relief and Economic Stimulus Act (CARES Act) has passed congress and has been signed into law by the President. Like all legislation, the devil is in the details. As the provisions of the law go into effect in the next couple of weeks, we will learn more of the details. For now, it is helpful to highlight 6 key benefits so we can make plans accordingly.
The coronavirus is not only a serious health scare, it is also a serious financial crisis. Businesses are being forced to shut down and people are losing their income. The stock markets are reacting negatively as expected. While taking losses in our equity portfolio is never a good thing, it does present an opportunity to reduce taxes this year and into the future.
The coronavirus pandemic has a lot of dark sides. Around the world, people get ill and die, schools close, the healthcare system is overloaded, employees lose their jobs, companies face bankruptcy, stock markets collapse and countries have to spend billions on bailouts and medical aid. And for everyone, whether directly hurt or not, Covid-19 is a huge stressor shaking up our psyche, triggering our fears and uncertainties.
Stocks just had one of their worst months on record with the S&P falling 8.2% on a total return basis.
These are the worst monthly declines on the S&P going back to 1926
You can see plenty of these massive down months have occurred in and around some of the worst market crashes in history — the Great Depression, the 1973-74 bear (we need a name for this one), black Monday in 1987 and the Great Financial Crisis.
Here’s the good news about huge monthly losses from the past...
We are in the midst of scary times. There is a lot of uncertainty about the coronavirus. Our government officials are shutting down schools, churches, restaurants, bars and all other places and events where we tend to gather in groups. In fact, just before I wrote this, President Trump held a news conference advising people to avoid gathering in groups larger than 10. This is good advice that we should heed to protect our health and that of our loved ones.
What are some of the money skills? Perhaps the most important is managing our cash flow. Debt management is a key skill. Other money skills include saving for short-term needs like emergencies and unexpected opportunities. Also saving for mid-term needs like education, entertainment and transportation while saving for the day when we no longer earn an income.