How Biases Impact Your Investment Decisions During The Pandemic

How Biases Impact Your Investment Decisions During The Pandemic

We make investment decisions by relying on fundamental analysis to determine if a security is undervalued. If the stock market is efficient, the stocks’ prices should fully reflect all available information. Therefore, the market demonstrates rational pricing. As investors, we try to capitalize on any discrepancies on a particular stock or a new report not already accounted for to profit on that position.

Sometimes stocks may be mispriced because of the psychology involved in decision-making known as “behavioral finance.” This discipline can offer behavioral/emotional or cognitive biases to explain why markets or stocks are moving in a certain way. Learning about these biases can help us to shift these tendencies away and invest more wisely.

Having biases–cognitive and emotional– may cloud our judgment when making investment decisions. To read about how to overcome biases when making financial decisions see here. Since the coronavirus pandemic, we have changed many of our consumer habits to protect ourselves from exposure. We have quarantined ourselves to practice social distancing, buying products in bulk, and shopping online. We can make changes when needed.

Investing During The Pandemic

Stock market turbulence ensued soon after the required coronavirus-related lockdown. Investors quickly anticipated social distancing would pause non-essential activities. As a result, investors sold stocks related to suspended travel, vacations, airlines, gym memberships, restaurants, car rentals, and oil. The cruise line securities, such as Norwegian Cruise Line, looked dead in the water.

During the worst of the pandemic, investors flocked to stocks that are the beneficiaries of the “stay-at-home” trends:

  • Zoom Communications, Slack, and Cisco (owns Web-ex) helped us communicate with loved ones, friends, colleagues, clients, and distance learning.
  • We used more streaming services such as Netflix, AppleTV, and Disney+ for binge-watching.
  • E-commerce providers (e.g. Amazon) attract those seeking bulk buying for groceries, toilet paper, and other essentials.
  • Teladoc provided video conferencing with medical professionals. 
  • Pharma and biotechnology companies: Pfizer, Johnson & Johnson, Regeneron, and Moderna are developing therapeutics and virus vaccines we desperately need.

Are We Opening Up, America?

Coronavirus cases are climbing, so our country’s full opening is likely further in our future. The change to a Biden Administration may provide new guidelines for the governors to follow in their respective states based on case trajectories.

 The stock market has a different mindset, looking to the future, not necessarily responding to daily news. We, as investors, are affected by attitudes that may blind us from making reasonable decisions.  

Explaining How Biases Work

As sometimes irrational beings, we frequently depend on our intuition. However, sometimes we are unaware of how our gut feeling may be faulty. These biases affect how we think, act, and decide whether to buy or sell stocks. Often, we go against our better judgment. Learning how these biases work is a first step to guarding ourselves against becoming irrational when investing money in the market.

Biases are either cognitive or emotional. Each can lead us astray. They create behavioral patterns that may interfere with our investment choices. Cognitive biases mean we are potentially making decisions on established concepts that may or may not be accurate.

On the other hand, emotional or behavioral biases are not distortions in cognition but emotional factors that may lead to poor decisions. Emotional biases are ingrained in our brains and may be harder to overcome than cognitive biases. Marketers exploit these behavioral psychology traits to get us to spend more and buy impulsively. We are just as vulnerable when we invest in our portfolio.

 Biases That Impact Our Investing


1. Anchoring Bias

When shopping, anchoring, a cognitive bias occurs when we place a lot of value in the first information we get. We often rely on the listed price when we make price comparisons. For example, seeing priced T-shirts that cost $700 in one store and another one that is $200 will cause the latter shirt to look cheap. The higher cost is your anchor price. Retailers often use a higher list price for coats on “sale” at $1,000 with a 75% markdown to $250. Now, that coat’s a bargain, but it may not necessarily be so.

Anchoring bias occurs in our buying and selling of assets. In real estate, say you purchased a 55-acre plot of land for $200,000 ten years ago. The plot is in a location that has been experiencing an economic downturn in recent years. Needing cash now, you receive an offer to buy your land for $170,000. There are no other offers on the market. You reject this deal because you paid a higher price. However, your broker tells you that recent comparables are way down, and the $170,000 was a fair price. It may be years before you see another offer, and in the meantime, you may have to borrow to pay monthly bills. The $200,000 anchor price distorted your view. 

Have you had this experience? It is not easy to admit you made a mistake either when you bought the asset at a higher price or by selling below your cost. I recently had to sell land at a lower price than I sought because I felt the market had changed fundamentally. 

Historical vs. Intrinsic Values

Investors often rely on the historical values of stocks or what they paid for the original shares. Anchors do not always reflect intrinsic value: the stock’s inherent value. Investors may be missing new information. For example, if you looked where Microsoft shares historically were trading, you may not want to pay “up” for the shares now because they are much higher. If that were the case, no investor could buy any stocks now because they are all higher, notwithstanding the hit the shares took in March 2020. Many have recovered a bit chunk of that fall.

Our first impressions form perceptions. However, update those initial feelings, possibly with research rather than anchoring, to affect our decisions.

2. Mental Accounting Bias

Mental accounting is a behavioral bias referring to different values people place on their money.  Regarding investments, they are mentally accounting for their original costs separate from their profits on those shares.

Daniel Kahneman and Amos Tversky have engaged in several bias studies. When an investor who wants to raise cash is holding two stocks, one with a paper gain and the other with a paper loss, what will he or she do? According to Kahneman and Tversky, this bias will cause the investor to sell the paper gain before the paper loss. Acknowledging the loss is more painful, but there may be benefits we are overlooking. Remember that the loss coming from the weaker investment may provide some tax loss benefits.

We feel the pain of losing money more than the pleasure of making money. By selling paper losses, we are converting an unrealized loss into a realized loss. That is, it’s a real loss. I can recall the day (March 10, 2000) I loaded up on dotcom stocks, the peak, or the dotcom bubble for the NASDAQ Composite stock market index at $5,048.22. However, on March 13th I paid for several companies’ shares that by March 16th no longer existed. My husband brought the check over to our broker. She had a good laugh that morning on my poor timing as many dotcoms rapidly collapsed in value.

3. Confirmation Bias

“I never allow myself to hold an opinion on anything that I don’t know the other side’s argument better than they do.”       Charlie Munger

Confirmation bias is about selective attention. People will remember information selectively, interpreting data to support their existing beliefs, even if the evidence is ambiguous. We tend to agree with people who conform to our ideas. Alternatively, we are dismissive of new information even if that provides evidence that is wrong but accurate. We often skim or do not read all of an article or report. You can see this behavior when a stock is dipping just as company results are out. Later, after management addresses analysts’ questions and provides more information, the stock may recover and be up for the day.

I sometimes see this bias when my students play the stock market game. For example, as a favored stock name drops, they look to support why it is down. I will see only one part of their argument presented. Yet, the opposite point of view also has merit. Looking at both sides allows them to consider that it may only be a short term blip and a possible buying opportunity. We are conditioned by social media, which often reinforces one side of a debate. That tendency is pervasive and used to protect our egos from thinking that may prove us wrong.

Did You Buy Zoom Communication Shares?

This bias may hurt our abilities when making investment decisions. For example, if you are genuinely open to deciding whether to buy Zoom shares now, then explore both sides of each decision. The upside of buying those shares is obvious. As a result of the pandemic, Zoom’s customer base has exploded in multiple areas. According to TechRepublic, Zoom’s most recent figures showed 300 million daily meeting participants compared to 10 million in December 2019. However, you should research the potential downside for Zoom shares.

Zoom has several risk factors to probe. How will privacy concerns impact growth, increased competition, new customers remain when the pandemic leaves us, and does the share price already reflect fair valuation? Ask relevant questions, and consider the pros and cons. Confirmation bias works when we may have a preference. It’s easier to make a quick analysis. Just make sure you have the relevant information to make your choice.

Talluria Study On Dots

Talluria et al. did a confirmation bias study. The researchers’ experiments sought consistency across different stimuli. In this case, the researchers asked the participants to view two successive movies featuring a cloud of small dots moving on a white computer screen. Participants reported on the direction of the moving dots after the first movie. Participants indicated the dots’ movement after the first movie then noted how the dots moved after the second movie. They recorded the dots headed the same way. However, they were moving in opposite directions.

The experiments showed that the participants’ biases. The Talluria et. al study proved that people will hold same confirmation bias even if they are making choices about dot pathways that are far less consequential than decisions about what house or car to buy, which job candidate should be hired or what school our kids should go to.

4. “Bandwagon” Effect Or Herd Mentality

The majority of us fall for the bandwagon effect whether we consciously know it or not. The bandwagon effect (or jumping on the bandwagon) occurs when people fear missing out. This tendency occurs when investors follow other investors’ investment choices. The herd mentality happens when people mimic other people’s actions irrespective of whether we may be imitating irrational behavior.

This psychological trait influences stock analysts on Wall Street as well. At times, analysts will change their thesis on a stock. They become more positive on the stock because their clients were buying the shares for their portfolios. These professionals never want to be the last one to change their rating either way and be viewed as the laggard or “me too” analyst. I found myself in that awkward position often enough.

Recalling An Analyst Experience

On the other hand, there is some difficulty standing apart from your peers.  As an analyst myself, I recall feeling pressured to either stand alone on a stock or follow the herd. This particular time, I changed my rating from  “BUY”  to  “SELL”  on a favorite stock for reasons of a negative fundamental change in the company.

Within 24 hours, that company’s management “demanded” I fly down to their offices to defend my rating. I was the only analyst to go to a sell rating. Going to a sell rating was an unusual step as most companies would give the analyst the cold shoulder. It turned out that they were respectful of my opinion and listened to my advice. Only later did it look like the rating change was prescient. Within 6-9 months, the company had righted itself and was healthy again. And yes, I upgraded my rating to a buy.

When IPOs Are “Hot” And Sometimes Not

The bandwagon effect is noticeable when stocks first enter the public market. If you are fortunate to buy shares of a great company “going public” through its initial public offering (IPO) you can make good money. On the first day of trading, these stocks can average 20% higher or more. Beyond Meat, which makes vegetarian burgers and sausages, began trading at $25 a share, ending the day at $65.75. This price appreciation was among the most significant first-day pops of IPOs at that time. This stock continued its rise months afterward.

However, many stocks ultimately flop after the first-day IPO rise, such as Blue Apron. Investors clamored for Facebook’s IPO, which immediately rose after it began trading. However, it fell back to its IPO price of $38 at the day’s close. It continued to drop to below $18 in a few months. Yet, investors who aren’t able to buy at the IPO price may flock into the market, jumping on the exciting bandwagon after the new stocks begin trading, only to be disappointed later on. Among the best investors of all time and a proud contrarian, Warren Buffett said, “Be fearful when others are greedy and greedy when others are fearful.

5. Framing Effect

We often make decisions influenced by the presentation of the information. Is the glass half-full or half-empty? Framing is used often in risky investment situations. Therefore, it may all come down to the presentation of facts and how it is received. For example, when company management release earnings results to the public, they can provide either option:

Option 1: “In Q2, our earnings per share (EPS) were $1.72, versus expectations of $1.75.”

Option 2: In Q2, our earnings per share (EPS) were $1.72, versus Q1 results of $1.69.”

The results in option 2 look more favorable because of its comparison to lower numbers in the previous quarter. Company management often frames its earnings by posting two different EPS numbers. The release may show the reported number and a second higher EPS result, excluding “one-time” charges or a higher tax rate. The problem for investors is to determine if it is a one-time event or will those charges repeat themselves in the future.

Amos Twersky and Daniel Kahneman did a lot of research in framing risk. They asked participants in their study to decide between two treatments for 600 people who contracted a fatal disease. People generally avoid risk when presented with a positive frame. Treatment A would result in 400 deaths, and Treatment B had a 33% chance that no one would die but a 66% chance that everyone would die. In their 1981 study, treatment A was chosen by 72% of people when framed positively as saving 200 lives. However, when presented with the same choice framed negatively as losing 400 lives, 22% of people selected it.

6. Ostrich Effect

Ever want to avoid bad news? You start to distract yourself with nonsense work, putting your head in the sand like an ostrich. I have done this more times than I would like to admit. It sometimes occurs when you are holding a stock and you ignore bad news a company has released like missing their earnings target. Rather than sell the stock, you may delay making a decision. This bias is a form of selective attention. Yet, we may be missing information that proves that this is a buying opportunity.

The recent stock turbulence produced a spectacular drop in March. I knew that I had paper losses in my investment portfolio, so I avoided looking at my accounts. Having been around the block as an investor, I felt embarrassed, angry, and emotional at my cowardice. Realizing there were worse things than paper losses, I felt guilty knowing COVID-19 was taking lives.

“Feeling Paralyzed”

Around this time, I came across the excellent New York Times journalist James B. Stewart’s article, “I Became A Disciplined Investor Over 40 Years. The Virus Broke Me In 40 Days.” He wrote of feeling paralyzed even after experiencing many market crashes. Many investors were feeling the same drop in their stomachs while looking at their retirement or investment accounts.

Stock Declines Are Often Buying Opportunities

Coined by Galai & Sade in their 2006 study, the ostrich effect means “avoidance of apparently risky financial situations by pretending it doesn’t exist.” In its 2009 study, Karlsson, Lowenstein & Seppi researchers found that investors checked their investment portfolio’s value 50% to 80% less in imperfect markets. While we don’t want to know the bad news, it could be beneficial. Investment experts point out that imperfect markets could be substantial buying opportunities. Those who participate in the market may pick up beaten-down stocks if fundamentals are alright. Surprisingly, as quickly as stocks dropped in those weeks, they have recovered a large chunk of their prices.

There is an old Wall Street saying that the market takes the escalator up and the elevator down. The saying means that the market drops faster than it rises. The uncertainty usually hangs over stocks like a cloud. However, recent trading has exhibited a rare anomaly where the S&P 500 recovered March 2020’s losses in days.I believe we may have many buying opportunities ahead unless the economy bounces back quickly, a challenging feat to accomplish.

7. Overconfidence Bias Aka Dunning-Kruger Effect

Ever sit next to someone at a holiday gathering when that someone is spouting about a stock investment they just made? They are holding everyone’s attention and speaking confidently.  You may admire that person for their intelligence at first. Later, you may realize that it is not so. This bias is when people believe they are smarter and more capable, but they do not have the self-awareness to recognize it. They hold overly favorable views of themselves.

Experienced investors know the dangers of overconfidence. A few easy wins can make you feel brilliant. However, losses can be chalked up just as fast, especially during a pandemic. The cure for overconfidence is recognizing the mistakes you made by overlooking what should have been obvious. Only in hindsight are there clear signs you should have passed on that investment. The tendency to overestimate what we know is prevalent.

Be Humble When Investing

Humility, not overconfidence is what is needed when investing. Brokers and financial advisers often post statements such as “Past success is not indicative of future performance.” They don’t want you to think they are overconfident because of what they have done in the past. They tamp down your expectations and their liabilities.

The overconfidence bias is sometimes known as the Dunning-Kruger Effect. In a Dunning & Kruger study testing humor, grammar, and logic, participants scored in the 12th percentile but estimated that they were in the 62nd percentile, overinflating their skills. They found that participants with overconfidence aren’t necessarily embarrassed to learn differently because they hold strong views of themselves.

Overconfidence can get in the way of digging deeper into a topic, whether investing for yourself or others. You may genuinely believe that you know a lot in a particular area. Others like your boss know better and aren’t impressed. Losses speak more significant volumes to your clients.

8. Familiarity Bias

When you go to a gathering or a party, where do you go to first? Most of us prefer looking for friends we know. Familiarity bias occurs when we instinctively favor what we know. When investing, we may prefer securities that performed well in the past overlooking other securities that may be better. When picking stocks, you always need to refresh your knowledge about the company.

Make sure that the stock’s fundamentals and strategies remain sound. If they are, that’s okay. You don’t want to select stocks solely because they are familiar to you. A good investor should always diversify her/his portfolio. Broaden your view by picking the best stock for your holdings, not just what is comfortable. That is not to say that holding an asset in your portfolio long term may be enacting familiarity bias. Being loyal to owning good stocks with strong fundamentals but are undervalued are reasons to have them. Long term holdings of good performing stocks are great strategies that doesn’t exemplify familiarity bias to your detriment.

9.  Status Quo Bias

Overnight we were forced to change our habits dramatically. As a result of the virus, we stayed home, and bulk shopped, wore masks and gloves. What you own or use is “the devil you know.” We are creatures of habit. This bias refers to our preference for the current state of affairs. Making changes can be difficult. Data shows that switching jobs at the right time can be a smart move if it helps to maximize income. Yet, many of us resist even exploring the opportunity because of the switching costs like working with different bosses, co-workers, benefits, and systems we don’t yet know.

Investors with status quo bias may resist making changes, even if it is a financially smart move. We may even hold onto a “losing” stock rather than sell it because we are continually expecting a turnaround that may never come. This bias is simlar to loss-aversion bias, which says that what you own is more valuable. I felt overwhelmed by the recent stock market volatility. As the market declined, I began to sell some of my losing stocks with higher risk portfolios to raise cash. Because I had a previous (bad) experience, I resisted selling large amounts of my winning stocks. Usually those are the stocks that come back in value more quickly.

 Wine Values That Appreciate

Kahneman et al. wrote in a 1991 study about a gentleman known to have gotten several good Bordeaux wine bottles at low prices. The gentleman learned that the wine much appreciated from its $10 cost per bottle. It would fetch $200 at auction. Although enjoying this wine on occasion, this man would neither sell at auction nor buy at $200. This pattern reflects the fact that people often demand much more to give up an object than they would be willing to pay for it. Our status quo bias suits us to hold onto this object we value, be it land, wine, or jewelry, rather than part with it.

Sometimes, we may stay too long in a far more risky portfolio we bought when we were younger and unencumbered. While it was appropriate, then, reconsideration of your current lifestyle now is essential. Speaking to a financial advisor at different stages of your life may help you realize that you should modify your investments. Your children may be approaching college years as you should be thinking about your retirement planning. Diversification and risk allocation should be reviewed by you annually and conformed to your life stage and appetite for risk.

Automate Where Possible

Overcome this inertia by planning. If you recognize that you have this tendency of paralysis and not making changes, automate your bill payments and automatically enroll in the retirement plan at work if this is available. Consider target rate funds when investing. These funds automatically reallocate your investments based on changes in your age and risk tolerance. When you start a new business, plan for an exit strategy if things don’t work out rather than losing money if success is not in sight.

10. Risk Aversion Bias

Risk and returns are positively correlated. That means that if you seek low risk, you will receive low returns. Wouldn’t we all want to generate high returns with low risk? If you find one such opportunity, would you mind calling me? Risk aversion bias means we favor a certain outcome over a gamble, even if it meant lower returns. Conservative investors or those close to retirement age may choose a low-risk strategy to preserve their capital. A risk aversion bias could be under-investing their capital for a young investor with a longer horizon if they decide on a low-risk strategy.

11. Present Bias And Procrastination

This bias values the present when we are planning for the future. Present bias causes many of us to spend money on the latest new shiny object rather than save for retirement. As a result, we favor the present by not delaying our gratification. However, this bias comes at the expense of postponing our saving for retirement and other investments. Rather than saving our 401 k employer-sponsored retirement account by taking small amounts out of our paychecks, we may be overspending. That leads to ramping up big bills on our credit cards.

We procrastinate rather than think ahead to our detriment. It affects our health, including our financial well-being. This tendency suggests that some of us shop impulsively, ringing up unreasonable bills and saving less than we should.  Stephan Meier’s study in 2010 found present-bias minded individuals are more likely to borrow and accumulate higher balances on credit cards. That means your debt is growing at compound rates detrimentally rather than the positive compounding growth you would get in your retirement bucket.

12. Sunk Cost Fallacy

The feeling of throwing good money after bad arises in many investment situations. A sunk cost is a cost that has already been spent and permanently gone. The problem is that we tend to hold onto investments that are underperforming well past their time it should be reasonably clear that it is sunk money. That is just a trap. Selling long term losses may provide you with the end of year tax loss benefits. Although throwing good money at losing investment may seem easier sometimes, it is better to admit your thesis is not working. Investing is not a “set it and forget it” activity.

Don’t Make Bad Decisions Worse

Investing is not a “set it and forget it” activity. If you are an individual investor, you need to set price goals for each stock you buy. I have often sold a stock after a 7%-8% price drop rather than wait until shares have dropped 25% when it gets harder to sell. If you are deliberately buying small amounts to a full position, then take advantage of improved dollar-cost averaging. Therefore, this is not a sunk cost fallacy but rather a strategy that provides lower costs for your shares.

On the other hand, I do trim stocks that rise 20%-25%, putting away small profits not to be too greedy. As another Wall Street saying goes, “Bulls make money, bears make money, pigs get slaughtered.” See this for more Wall Steet jargon explained.

Recognize those small losses will become more significant if you continue to spend or invest money you no longer support. By continuing down the road, you are making a wrong decision worse. Learn how to cut losses and consider that amount in the past.

13. The Halo Effect

Ever find yourself prone to first impressions? Many of us consider those early beliefs as important. We are often heavily influenced by one trait’s halo effect is but ignore other characteristics, whether good or bad. Sometimes certain people or companies can “do no wrong” because they have a teflon surface. We prefer to make snap decisions rather than a thoughtful analysis which is needed.

Investors may choose well-known brands like Apple, Microsoft, and Johnson & Johnson because they and their businesses are well known. When Apple successfully rolled out a number of products in a short period of time, its shares had the halo effect lasting well after the launch. While many companies maintain solid reputations for decades, be on the alert for changes that result in poor decisions.

Final Thoughts

As humans, we have biases that create blind spots in our lives. During this pandemic, we may become even more irrational. Our mindsets distort how we make investment decisions. We can outsmart these tendencies.  Instead, greater awareness will allow us to invest more wisely.  Be proactive and understand both sides of the argument to make informed choices. Take charge of your financial future.

Thank you for reading!

Did you recognize any biases you have? How do you overcome these tendencies when investing in assets? We would love to hear from you! Please subscribe to our blog and find more articles like this.


A Letter To College Students During This Pandemic

A Letter To College Students During This Pandemic

Dear Students,

This is anything but a normal year for you. Some of you may have graduated this spring, transferred to other colleges, or in your first year. I truly feel for you. Experiencing a health crisis is tough enough but this economic downturn will have major repercussions. If this is your graduation year, it could mean the loss of summer internships. Also, there may be uncertainty about job offers you accepted to begin your careers in the Fall. If you are returning to your campuses, it likely will remain difficult with social distancing a requirement.

As a professor, I am experiencing a disruption to our academic term. My college students are from a diverse community college in an urban setting. Their communities are among the most severely impacted by the pandemic. Most work while attending school. Many are first responders or working in essential roles as healthcare workers while taking care of family members. While this letter is for them, I am writing to all college students.

A Changing Landscape

Every student in college has been impacted. Feeling a sense of loss akin to grief would be totally normal. One day you are at school with an essential structure, mixing your social and academic lives in a healthy blend. Virtually the next day you are home, remotely learning and with your parents. This abrupt ending to that structure is unsettling.

Freshmen were just getting comfortable adjusting to dorm life when they were rushed home. On the other hand, seniors should have been experiencing a rush of excitement and nervousness about entering the real world. Now that landscape, which was looking so promising, has changed overnight. The class of 2019 enjoyed the best job market since 2007. More than half of the class of 2007 college grads had job offers by the time of graduation. Your world may now look more like the classes of 2008 and 2009 who were most affected by the Great Recession. Fewer than one fifth of graduating seniors in 2009 had job offers.

Economic Downturn is Here

According to Bureau of Labor Statistics in July 2009 when the overall US unemployment was 9.4%, those who were 20-24 years were experiencing 15.3% unemployment.

Related Post: Why Employment Matters?

One question that may be on your mind is whether the pandemic will create generational pressure on your class as GenZers similar to that of Millennials. Many studies have shown that Millennials, born in the 1980s, struggled out of the college gate. The Federal Reserve Bank of St. Louis did a study entitled, “A Lost Generation.” That report found that wealth in 2016 of a median family headed by someone born in the 1980s remained 34% below expectations based on earlier generations at the same age.

Recessions tend to be hardest on those entering the job market with a college degree in hand but not a lot of work experience. My own teens are not yet in college but I can imagine what parents are thinking. Every parent wants their children to do better than they did. They want their children to be happy, healthy, fulfilled and have enough wealth to be financially comfortable.

Related Post: How To Prepare For A Coronavirus-Related Recession

Ominous Forecasts Near-Term

Hearing economic forecasts of 30%+  unemployment rates in the near term with GDP contractions of 34% in the second quarter 2020 definitely sounds ominous. However, many economists are looking for improvements as early as 3Q2020. It is too early to tell with coronavirus still raging on though some say the devastating number of people affected is peaking. That means there will soon be a gradual move to more fully open the economy. Meanwhile, to stimulate the economy, the Fed has taken far more aggressive action earlier than in the previous recession. Simultaneously, the US Treasury is serving its role by rolling out large stimulus packages with more financial help on the way.

The Care Act Will Provide Some Relief

If you are carrying student loans there may be some good news for you. A major part of the $ 2.2 Trillion CARE Act is devoted to easing the student loan payments you owe from its effective date of March 13, 2020, until September 30, 2020. While temporary, Congress may keep some of these beneficial provisions longer or even made permanent. Among its major provisions are:

  • Suspension of involuntary collections of student loan debt, including wage and social security garnishments and tax refund offsets.
  • Federal loans will suspend payments automatically on Direct loans and Federal Family Education Loans (FFEL) which account for 88% of federal loans.
  • No interest will accrue during the six month period. Paused payments will count toward requirements for Public Service Loan Forgiveness (PSLF)  programs and income-driven repayment plans.
  • There will be no impact to your credit report as suspended payments will be reported by the US Department of Education to the national credit bureaus (Equifax, Experian, and TransUnion) as if they were on-time payments.
  • Expands IRS tax code section 127 to allow employers to reimburse up to $5,250 for most student loan payments which can be excluded from taxable income. SHRM says 8% of US organizations offer this terrific employee perk. More companies may jump on this bandwagon to help employees with these payments in the future.

These changes are automatic. This means you do not have to contact your student loan servicer. That said, if you are unsure, I think it is a good idea to inquire if your loan is covered.

What Loans Are Not Included In The Care Act

Some federal loans (about 12% of those) do not qualify for relief under the CARE Act. Excluded loans are Perkins Loans and FFEL loans held by commercial lenders. Private loans also are not part of the CARE Act. In any case, contact your private loan servicer to learn about their respective plans to ease payments during this time.

Positives That May Come Out Of This Disruption


1. Remote Learning And Flexible Work Options

You may have been rushed into distance learning without ever having taken a class online. Remote learning will only increase in the future. View your experience as being “thrown out of the frying pan into the fire.” As a result of the virus, the majority of college students are engaged in distance learning. Stay in contact with your professors, college advisors and, of course, your college friends. Counseling programs are available through your school remotely.

Remote learning is not perfect. There was little time for all of us to prepare. However, participation for online courses provides you with another skil lset. Many employees are now working from home so your experience with remote learning will be helpful. Expect that trend to continue as employers create more remote work options when things get back to normal.

2. Possible Stimulus Check

For students who are independent–like many who go to graduate school or are older–you may be entitled to a stimulus check. Being independent means that your parents are not claiming you as a dependent for tax purposes. Depending on your status, whether individual, married with or without children, the one time amount ranges from $1,200-$2,400 if you (and spouse) earn an income of $75,000-$150,000 plus $500 per child.

Separately, check with your college financial aid office if you are experiencing some financial difficulties. You may have stayed on campus for work opportunities if you were unable to get home. Also, if you are home, you may be in need of a computer and an internet connection. Ask about resources that may be available to you. You may be entitled to refunds for room, board, meals and other services. That refund can be used for next year unless you need emergency money for now.

3. Use This Time To Plan For Your Career

Get your resume up to date and don’t worry about work gaps or internships that were cancelled. Everyone knows the reason why you may not be working this summer. Motivate yourself to use this time to be ready when the job market improves. The worst thing you can do is sulk and feel sorry for yourself. Of course you feel sad but lift up your spirits. You are young, capable and smart. Combining those traits with a good attitude will be an important part of your future value. Make time to work on your Linkedin profile so you can stay connected and for networking.

Take any and every possible remote interview that may come your way whether it is for future internships, part-time work or a job in your career. Recruiters should be sympathetic to your plight given their own experiences during the Great Recession.

4. Do Know Your Major? If Not, Some Suggestions

If you are a first year college student, have you settled on a major? Times like these sometimes result in directional changes. I went to law school post September 11th after years of being on Wall Street. If you are undecided on your major, consider  STEM and business, both of which ranked high on these 2019 lists of best majors for lowest unemployment or highest paying majors. 

Better yet, you may be inspired by those who have been on the frontlines. Here are 6 occupations that are in demand now as part of this pandemic. The coronavirus will be hopefully under control. However, there will be growing calls for these professionals such as epidemiogists, laboratorians, registered nurses, behavioral health professionals, environmental health experts and Biostatisticians.

5. Jobs Will Be Created That Do Not Yet Exist

True, the job market may be a difficult place for the near term for those graduating this year. Think carefully about alternative options. Public service programs provided attractive employment opportunities after the last recession. If you can’t find a job, consider volunteering in an area of interest where you can learn and have worthwhile experience. Consider going to graduate or professional school directly after college if you are set on law, medicine, business, engineering or other professions.

This is a time to be as flexible as possible. You may have had your heart set on working in Silicon Valley, for Apple, Facebook, Google or other tech companies working on cutting edge technologies like artificial intelligence. That still may happen. Why not go on their respective websites and learn about what they are doing, especially to combat COVID-19 either individually or as partners? For example, Apple and Google are working together to build contact-tracing into their operating systems to contain the pandemic. There are many gaps that will create jobs  that do not exist today.

6. Life Lessons For GenZers

We are all learning life lessons about this once-in-a-lifetime experience. However, you are young and therefore more pliable than most generations currently in the workplace. Generation Z has some defining characteristics that are essential for the workplace. As the only generation that can truly be called digital natives, you are always connected, comfortable with newer technology and social media. A piece of advice, however. Put down your phones and make eye contact more.

You may welcome some of the societal changes coming as a result of this pandemic. It is well known that you like to work independently or collaboratively, and openly in work areas. Your generation is diverse and was raised with inclusivity. That can be helpful in an environment that wants to reduce income inequality.

Final Thoughts

In closing this letter to you, I know this is a painful time. You can’t change the circumstances. No one saw this pandemic coming as quickly as it did. Your future may seem a bit cloudy at the moment. Control what you can rather than focus on the negatives. Many experts are working on the health and economic crisis. Let them do their job while you do yours to the best of your ability. Be positive, be proactive and be flexible. Most of all, stay healthy!


Your Professor

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Ten Commandments of Personal Finance

Ten Commandments of Personal Finance

We revisit ancient views of money on ten major tenets of personal finance from timeworn texts and stories. Surveying these words add a different perspective on finances whether you are celebrating the holidays or not. There is a common thread across varying beliefs on how to handle money, saving, overspending, debt accumulation, and investing.

Ten Commandments of Personal Finance:


1. Financial Planning

A financial plan is essential to achieve your short term and long term goals. According to Proverbs 21:15, “The plans of the diligent lead to profit as surely haste leads to poverty.” Understanding your priorities in an important first step. With hard work, you can accomplish what you want so long as you know what your preferences are. This is not always clear to us especially when we are young. “Put your outdoor work in order and get your fields ready; after that build your house.” (Proverbs 24:12).

Making a plan doesn’t happen overnight. Set reasonable priorities incrementally as you engage in deep thought and conversations with your partner. It is often hard to address many features of a good financial plan on your own. Reduce some of the risks upfront whether you are investing stocks or starting a business. One of my favorite books, Richest Man In Babylon by George S. Clason provides some guidance, saying “Gold slippeth away from the man who invest it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.”

Consult A Fiduciary

Consider a financial advisor trained as a fiduciary who has a duty to act in your best interests, rather than his/her own. Such an adviser can provide a framework to help you with your goals for retirement saving, investing, and estate planning. “For by wise guidance you can wage your war, and in abundance of counselors there is victory.” (Proverbs 24:6).

2. Saving More, Spending Less

Saving money is an important financial habit. According to a CareerBuilder report, 78% of American workers were living paycheck-to-paycheck. The report found almost 1 out  of 10 workers making $100,000 were having trouble making ends meet. When facing a weak economy, rising job losses cause financial stresses. For those reasons, having an emergency fund is a necessity to pay for basic living expenses for at least 6 months. Having readily accessible funds in liquid funds such money market securities helps you avoid increasing debt.

Joseph’s Emergency Funds

Emergency funds as a prudent strategy appear in Genesis 41:34-36. In this passage, Joseph interprets Pharaoh’s dream about seven fat cows grazing by a river swallowed up by seven skinny cows. Joseph views the seven fat cows as seven prosperous years for Egypt, followed by seven years of famine. As a result of planning for this disaster, Joseph advises Pharaoh to store grain during the good years to be used in the following harder years. Save when you have more for those times you have less due to job loss, illness or some crisis.

Adopting a habit of saving more provides you with more flexibility to allocate into investment and retirement savings. Begin by setting aside small amounts of savings of $1,000 but don’t stop there. Tough times prove that amount is inadequate. Don’t think of these savings as wasteful assets. Rather it is a means to avoid higher debt levels. As Proverbs 13:11 tells us, “Dishonest money dwindles away, but whoever gathers money little by little make it grow.”

3. Track Your Spending By Budgeting

Spending more than your means is a bad recipe that leads to borrowing more. It is far more profitable to save money and allocate to investments that yield 5% returns or more than having to borrow at mid-teen rates with credit cards to pay for your overspending habits. “Whoever works his land will have plenty of bread, but he who follows worthless pursuits will have plenty of poverty.” (Proverbs 28:19).

Track your spending carefully by budgeting according to your priorities. Bava Metzia 42a instructs us, “A person should always divide his money into three: one-third in the ground (for the future), one third (invested) in business, and one-third in possession.” That may be an ancient way of splitting your funds. There are several ways to budget such as tracking your expenses, creating a monthly budget or using the 50/30/20 rule. The latter budget is Elizabeth Warren’s  rule of thumb using 50% of aftertax or net income for your needs, 30% of net income for your wants, leaving 20% for saving money and paying debt. Budget in any reasonable way you are able to control your spending.

Avoid Lifestyle Inflation

Overspending leads to materialism and  lifestyle inflation that is hard to maintain. Mishlei Proverbs 13:7 tells us, “There is one who feigns riches but has nothing; one who feigns poverty but has great wealth.”  According to Psalms 128:2 “You shall eat the fruit of your effort–you shall be happy and it shall be well with you.” This reminds me of another favorite book, “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley and William D. Danko.

Stanley and Danko profiled and compared millionaires in two categories: those who were under accumulators of wealth (UAWs) and the prodigious accumulator of wealth (PAWs). The UAWs were individuals who had a low net wealth compared to their high income because of spending to maintain their status. On the other hand, PAWs managed their wealth better, often living in blue collar neighborhoods and buying used cars. It is an eye-opening account about the good and bad money habits of the wealthy.

4. Manage Your Debt Wisely

The successful millionaires practice budgeting and bargaining. They avoid debt accumulation to lower their risks.  According to Proverbs 22:7, “The rich rule the poor and the borrower is slave to the lender.” Manage your debt wisely. Pay your bills on time and in full. Don’t carry high credit card balances. You need to pay your card balances in full not merely the minimum or your debt will be accumulating quickly because of compounding growth. 

Managing your debt and developing good credit habits are essential in your financial lives. Learn how to avoid common credit mistakes in a recent post here.

Related Post: How To Pay Down Debt For Better Financial Health

5. Retirement Savings

Start saving for retirement in your 20s through your employer’s sponsored 401K plans. Deposits in small amounts in retirement accounts made regularly benefit from tax advantages and compound growth over a long horizon. Your tax-deferred contributions are taken out of your paychecks and employers often match a portion of your contributions. This is like extra money you can earn from your employer. Separately, establish an IRA (Roth IRA) for further retirement savings. Target your contributions to amounts capped by the IRS for maximum growth for retirement.

One of my favorite quotes in The Richest Man is this: “It behooves a man to make preparation for a suitable income in the days to come, when he is no longer young, and to make preparations for his family should he no longer be with them to comfort and support them.” Providing insurance should be arranged for your family to cover potential risks. “We cannot afford to be without adequate protection.”

6. Diversify Investments

Allocate some of your savings into investments. Whether you have a financial adviser to guide you or you manage your own investments, make sure to be diversified to reduce your risks. Don’t put all your eggs in a basket unless you are using Easter eggs for a holiday hunt. Ecclesiastes 11:2 says, “Put your investments in several places-because you never know what kind of bad luck you are going to have in this world.”

The financial markets go through turbulent times. Reducing risk through diversification of your assets into stocks, bonds, real estate (including home ownership), and money market securities is the best way to weather those stormy times. Diversify within each class of investments to avoid the pitfalls. That means having some stocks with growth portfolios and those with healthy dividend yields.

Bull Market To Bear Market In Record Time And Then…

We have been enduring severe moves in the market going from a bull market, to correction territory and bear market in weeks. And just as quickly this week, the stocks rose substantially reacting to aggressive Federal Reserve action. However, it is difficult to predict where stocks are headed. Companies have yet to assess their full year 2020 forecasts with the economy in a downturn. For long term stockholders, staying the course rather than panic selling seems to be a better path.

7. Don’t Obsess About Money

Maintain balance in your life that isn’t solely based on wealth accumulation. According to Proverbs 21:20, “Precious treasure and oil are in a wise man’s dwellings, but a foolish man devours it.”  While no one seeks to become poor, there are dangers of solely wanting to be rich. “Keep your lives free from the love of money and be content with what you have.” Hebrews 13:5

Rev. Martin Luther King Jr. worried about the obsession of money in his famous speech, called False God of Money. He said, “We attribute to the almighty dollar an omnipotence equal to that of the eternal God of the universe. We are always on the verge of rewriting the Scriptures to read, ‘Seek ye first money and its power and all these things will be added unto you,’ or ‘Money is my light and salvation, what shall I fear.”

King himself lived frugally, leaving little money for his family. However, he saw other goals like working hard, investing in education and having faith as far more important.

8. Add Knowledge, Working Hard

Become a lifelong learner adding knowledge and skills. “Wisdom is a shelter as money is shelter but the advantage of knowledge is this: wisdom preserves those who have it.” (Ecclesiastes 7:12). By investing in yourself, whether learning a skill, a language or knowledge, you grow in confidence and are valuable to others. “Lazy hands make for poverty, but diligent hands bring wealth.” Proverbs 10:4

Work hard and persevere in your job, your career and your profession. As a result of the coronavirus and social distancing, we are seeing many people who do not have the luxury of working from home. I am speaking of doctors, healthcare workers, grocery store clerks, bus drivers and untold heroes working hard to save lives or are engaged in essential jobs.

“The Street Sweeper”

Dr. King valued those who worked hard. Another favorite King quote, “If a man is called a street sweeper, he should sweep streets even as a Michaelangelo painted, or Beethoven composed music or Shakespeare wrote poetry. He should sweep streets sp well that all the hosts of heaven and earth will pause to say, ‘Here lived a great street sweeper who did his job well.”

9. Be Ethical

We have a responsibility to be ethical to others. That means not to scam, steal, or be dishonest. Respect others’ property. Wastefulness is shameful according to the Torah and should destroy any useful objects according to Deutronomy 20-19. Destruction is only forbidden when it is without purpose. For example, only trees which you know do not yield food may be destroyed   We should not borrow anything without permission. According to Leviticus 5:23, “He must return the stolen article, the withheld funds, the article is left for safekeeping, the found article.”

10. Be Charitable

According to Jewish law, it is forbidden to impoverish one’s wealth by distribution of all of one’s wealth to charity. However, one can leave one-third of his estate to charity in his or her will. A minimum of one-tenth of one’s oncome belongs to God per measure handed down from the Patriarchs as Jacob himself said to God, “Of all that You give, I will set aside a tenth to You” (Genesis 28:22). Giving 10% of your net income annually is a virtual goal. Those who can, should.

According to HW Charles in The Money Code: Become A Millionaire With The Ancient Code, “Those who love people acquire wealth so they can give generously, after all, money feeds, shelters and clothes people.” We should strive to be as generous as possible to those in need.

Final Thoughts

Ten commandments of personal finance are inspired by scriptures that are timeless. Sometimes ancient words remind us that money management was always a challenge to be conquered. That said, you can personal finance lessons wherever you look. Choose financial success by your actions in dealing with money. Determine your priorities and set out to accomplish them. Building doesn’t  happen overnight those loss of riches apparently can and has for many. I know that these days have been difficult for many because of the coronavirus outbreak. It will take time to get back to normal. In the meantime, stay healthy.

Thank you for reading our piece.

Coronavirus: Protect Your Finances And Your Future

Coronavirus: Protect Your Finances And Your Future

“When we are no longer able to change a situation, we are challenged to change ourselves.”

Viktor E. Frankl, Man’s Search For Meaning

Our values are tested during a crisis. We have learned that we need to make certain changes to our lives. As such, we have adapted our social relationships, our working lives, distance learningl to preserve our health and that of our communities. Crisis breeds uncertainty which none of us like. We don’t know how long this crisis will last before we can go back to normal. What is certain is that there will be more crises in our future.

To better deal with the anxiety, focus on what you can control and be true to your long term values. Use this time to reflect on what is important to you and your family. Take measure on what you have learned during this crisis about yourself. Some of the adjustments we are making will be transformative. Besides healthy handwashing, maybe you have experienced telemedicine, distance learning or remote working, options that are likely to grow.

Increased Financial Stresses

Many families are realizing greater financial stresses during this pandemic. The economy is in a downfall, financial markets may not yet have bottomed, and job losses are rising.Take some steps to review and strengthen your financial priorities and goals.

After all, April is Financial Literacy month. COVID19 has provided new meanings to our money values. While not all of our goals relate to money, it may be more about what you value. You may need better habits to accomplish your goals. Consider what changes you can make as a result of this crisis.To better achieve our short term and long term financial goals, we need better habits.

7 Steps To Improve Your Finances:



1. Emergency Fund Is A Necessity

Building an emergency fund for unforeseen events is essential. The coronavirus is a black swan event of major magnitude. A black swan event by its very nature is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. We have had major flu outbreaks but the impact of COVID19 brings more comparisons to the Spanish flu in 1918.

While no one could have predicted this pandemic, we should always have access to liquidity to pay for our basic living expenses. Establish an emergency fund of at least 12 months of your living expenses and learn where to invest it. Your fund should be a big enough cushion to pay your monthly bills and costs such as food, rent or mortgage, utility, health care, car, property taxes, and pet care. Previous guidance of 3-6 months seems woefully inadequate during these times.

This is not wasting assets as some think. Instead, it is preserving your future assets prudently. Without such a fund, you may have to borrow to pay your rent and other basic needs. File for unemployment insurance in your state which has been boosted in your state. Plow any incremental savings into your fund.

2. Make Savings A Habit

Yet we all have excuses as why we don’t need to set up an emergency fund account. You believe you have a stable job, your parents will help you out or you can always use your credit cards. You may not be able to fathom putting one month of savings, let alone the recommended one year of basic living expenses  in an emergency fund. It could simply be that you are procrastinating and intend to have one. Unfortunately, you can’t time your financing needs for the unexpected times you need cash.

Start saving a little at a time. Saving is always a good financial habit. You should budget for 10%-20%  of your income to go into savings. Part of those dollars should go towards unexpected needs. With social distancing (really physical distancing), you are likely to find that you have more savings because of less entertaining, not eating out and canceling vacations.

Life will eventually go back to normal, hopefully soon. Why not put some of those savings into your emergency funds? The rest of thost funds should be distributed to paying down debt, ongoing retirement contributions and careful investing in the market. Here are some ways to save without changing your lifestyle significantly, ” 25 Ways To Save Money And Feel Good About It.”

3. How To Pay Off Debt

As a result of the coronavirus, there may be some help regarding different kinds of consumer debt. Recently, government actions have added some flexibilities for temporary forbearance or payments of student loans, mortgage loans, personal loans, car loans, or possibly credit cards. Additionally, if you own a small business with less than 500 employees there may be benefits for the owners and employees if you abide by restrictions. However, you need to understand what the rules are. For example, there may be mortgage relief associated with the coronavirus. Now would be a good time to refinance your mortgage and othr debt at lower rates.

Check These Resources For Help

However, it is best to take a look at the Consumer Finance Protection Bureau for advice. Take a look at the Small Business Administration or SBA website for their guidance, especially for disaster loans if you are a small business owner. Those who are having trouble paying your bills or loans should review America Saves has a wealth of information here. If you have federal student loans, the government has placed your loan during this emergency into administrative forbearance from mid March 2020 until end of September 2020 with more information here.

Generally, you should adopt a plan to keep your debt levels at manageable levels. I advocate reducing loans with the highest loan rates first. On the other hand, if reducing small amounts of debt works better for  your motivation, then do that.   Automate payments to avoid late payments. Pay your credit card balances in full, not just the minimum. Spend within your means to lessen or eliminate your borrowing needs and avoid having to use your credit cards excessively.

4. Stay Vigilant And Check Your Credit Reports

With every crisis, financial scams increase. Phishing and investment scams rose during the 2008 financial crisis and coronavirus outbreak is no exception.  Scams like phishing involve the sending of emails and texts purporting to be from reputable companies. They are inducing you to provide personal information, like social security numbers, credit card numbers and passwords.

Both the FTC and FDIC have issued alarms to consumers to stay vigilant. Monitor your credit reports to find errors, and to find ways to improve your FICO score. This will help put you in a position to have financial flexibility when needed.

5. Continue Your Retirement Contributions Or 529 Savings Plan

If you lost your job or are on furlough, you may not be able to make the same contributions to your 401K,  Roth IRAs or 529 Savings Plan. If you are able, continue to do so without interpretation even if in smaller amounts during this time. Remember that these accounts benefit from tax-deferments and compound growth. Avoid withdrawing money from these accounts as there may be penalties beyond the loss of growth. Hopefully, we are in a short term crisis and you don’t want to damage your long term growth.

Generally, save for retirement through tax advantaged employer-sponsored benefits. Separately open up an IRA (preferably a Roth IRA) for more retirement savings.

Set up a 529 savings plan as early as possible for your newborn. This can help you and your child avoid borrowing later on for their college tuition.

6. Investing During A Down Market

Does an economic downturn mean you should sell stocks? Not necessarily if you have a long term strategy. Financial markets go through corrections, bull and bear markets. Selling during economic downturns will provide actual rather than unrealized losses. Many times that is the worse time to sell your securities. That said, when stocks do go up, it is a good idea to at least trim some of your holdings in these kind of markets if you are risk intolerant.

Take a look at our stock indices from peak to trough during the Great Recession:

Dates                                  S&P 500                      DJIA                  NASDAQ

10/09/07-Peak                   $1,565.15                 $14,164.53            $2,803. 91

03/09/09-Trough                $ 676.53                   $ 6,547.05             $1,268.64

Percentage %                        -56.8%                     -53.78%                 -54.75%

By mid May 2009, the S&P 500 was up 30%, rising over 60% by year-end 2009. Although you can’t pick the exact bottom of the markets, you can go bargain shopping for stocks that have undergone corrections or are in bear territory. For example, tech stocks have been strong leaders in the market but corrected during US-China on-off trade talks (remember that?).

What Can We Expect

Jobless claims are soaring and will continue for at least several months. The St. Louis Fed has pointed to a 32% unemployment rate by second quarter 2020 based on credible back of the envelope calculations.  Companies are reducing their upcoming earnings forecasts because of  reduced demand. Our economy has been shocked due to disruption but the Fed continues to proactively add liquidity to our markets as the federal government has added fiscal stimulus and likely to add more to our markets.

Could this mean we can bounce back quickly from that wicked unemployment rate and if so, could we miss a stock buying opportunity?  No one has picked the bottom unless they called it retroactively. (Wink, wink). That said, for those who have some available funds, it could be a good time to invest money in stocks so long as you have a long term horizon. Use small amounts and diversify your holdings if you are buying individual stocks. Better yet, research and find some low cost index  S&P 500 funds that mirror the market.

 7. Practice Gratitude More…It Helps Our Spirits And Our Finances

Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you will never, ever have enough.” Oprah

We still can stay connected during this crisis, if not physically at the moment. Expressing gratitude to loved ones, colleagues and our heroes help us, let alone those who deserve it. Who hasn’t felt moved by strangers helping others, checkout at the grocery store, or stories we are reading on the Internet. We have new sets of heroes to thank such as bus drivers who we usually walk past, doctors and healthcare workers who risking their lives, construction workers and so many more.

  •  Simply smile at what you have in terms of family, friends, a job or career you enjoy.
  • Send old fashioned “thank you” notes to those whom you are grateful to or for having them in your life.
  • Keep up a gratitude journal to save those great moments.
  • Practice saying and thinking about gratefulness in a meaningful way.

I admit that there are times when I focus too much on life’s burdens that feel like they are overwhelming me. Exercising your ability to switch gears to counting your blessings over burdens often works for me. With two teenagers, it can be challenging to have some quiet moments for yourself. However, I find it can work for the good.

Sometimes losing a loved one makes you more grateful. It may run counter to the most difficult experiences. My mother lost her whole immediate family and extended family except for my Uncle before the age of 20. Yet, she was always grateful for her life and that of her brother’s. It gave her the chance to have her own family.

Having a traumatic experience often makes us grateful. We truly are going through a difficult time sharing a common enemy that has no political affiliation, no color, ethnicity, or religion.

Let’s be kind and grateful to each other. By the way, did you know that gratitude can lead to better finances? Really, read about that here.

Final Thoughts

Financial stresses have increased for many Americans as a result of the coronavirus. Clearly, we are entering a period of  an economic downturn and increased uncertainties. It is a good time to focus on what we can control rather than on the uncertainties. As April is Financial Literacy month, we reviewed 7 steps to improve your finances. Think for the long term. Practice gratitude to our loved ones  which helps our spirit and patience. Stay healthy!

We appreciate you taking the time to read our blog and welcome any of your comments and thoughts!




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Coronavirus: A Tipping Point For Rising Flexible Work Options

Coronavirus: A Tipping Point For Rising Flexible Work Options

If the coronavirus has taught us one lesson, it is our need for adaptability. Virtually all aspects of our lives have had to change. By failing to change, we potentially expose ourselves to a deadly virus. Hopefully, predictions are less dire than some fear. There are benefits to be reaped from every disaster. A dramatic move to distance learning for educators and students is one positive outcome.

Another positive result is the potential advancement of remote working allowed by small-to-large employers in this post-COVID world. With 56% of the American workforce holding jobs that could be done from home, 75 million employees could be working remotely, saving employers $30 billion per day. There are advantages for both employees and employers in having work-at-home options. The necessity for social distancing may prove to be the tipping point for increased remote working arrangements.

Flexible time has already been a desirable company perk for college grads, Millennials, and even Boomers. Expect new college grads, including GenZers, to seek flexible work options as well. This trend has increased by 91% for employees in the last ten years. However, remote working tends to be more available for specific careers such as accountants and software engineers. Perks like flex-time are more common for those earning high incomes. About 75% of employees working from home earn over $65K.

Employees Are Increasing Seeking Flexible Work Options

Statistics about the direction of remote working were compelling before the coronavirus outbreak. Here are recent numbers based on various surveys:

  • In Gallup’s 2016 report, 43% of employees work remotely with some frequency. Since 2016, the Gallup State of American Workplace reports that the amount of time working at home has increased.
  • As technology expands, 62% of employees say they could work remotely, according to a later poll by Citrix in 2019.
  • 35% would change jobs for the opportunity to work from home at least some of the time, with Millennials having a greater preference at 47% compared to Boomers at 31%.
  • One-third of workers would be willing to take a 5% pay cut in exchange for the option to work from home at least part of the time—State of Remote Work 2019, Owl Labs.

Advantages Of Remote Working


Alternative work arrangements are valued as long as employees have reliable internet connections. The ability to have a more flexible schedule is the most significant benefit according to 32% of people who regularly work remotely as reported in a 2020 Remote Work survey. For working parents, the desire for working at home tends to be higher than people without children. Working at home tends to be less stressful. Avoiding lengthy commutes reduces angst while saving time and money. As a result of the virus outbreak and social distancing, many workers could transition fairly easily to working from home.

It is challenging for young people seeking desirable jobs in San Francisco and New York City to find affordable apartments or homes. Working from home at least part of the time could be their solution. Eliminating some commuting time would be a game-changer, especially if they are thinking about starting a family. Autonomy for employees working at home leads to improved job satisfaction.

Increased Productivity

Many employees report increased productivity working from home. If you have self-discipline, chances are those traits transfer to wherever it is that you work.  Distractions at the office occur beyond the water cooler. Gossip, office politics, meetings, and calls often threw me off my game when I worked on Wall Street. I was far more productive late at night or over the weekend when I tuned everything out, but the work needed to get done.

To be productive at home may require some self-discipline. Prioritize your “must-do” work first. Then manage your time to maximize your achievements fully. I can thank my mom, who always pestered me by asking “So what did you accomplish today?” at a very early age. One danger of working home is that many people say they work longer hours. While it is easy to justify longer work time without the commuting time, give yourself that needed break. Take a walk, exercise, or text a friend.

Working-At-Home Savings

People working from home realize additional savings. According to Global Workplace Analytics, working at home half the time results in savings of $2,500-$4,000 per year. The reduced costs stem from less travel, parking,  and food. These savings are net of expenditures for the home, such as additional energy and food costs. These outlays may vary depending on how far your commute is and if there are bridge & toll payments. You may even save money on your office wardrobes by staying in casual clothes or PJs. Remember to put these savings into your emergency funds account and invest in accessible liquid securities. We discuss why you need an emergency fund and where to invest your account here.

Time is a precious resource and worth saving. If you work remotely half the time, Analytics estimates you save the equivalent of 11 workdays based on lower commuting time. Who wouldn’t want to get those days back? There is a close relationship between time, money, and productivity.

However, not all employees want to work from home. In a Robert Hall survey, 47% of employees surveyed said that the company provides that option. Of that 47%, 76% do take advantage of the perk either working at home or elsewhere. However, 24% of employees did not opt to work outside of the office.


  • They did not have adequate technology available at home (39%).
  • Workers are not as productive working from home (38%).
  • Fear on missing out on opportunities or assignments if they were not in the office (29%).
  • Working at home can be lonely and missing interaction in the office (22%).

Employers Who Offer Remote Working Options To Employees

According to the SHRM 2019 Employee Benefits survey, 69% of employers offer remote work on an ad hoc basis to at least some employees. However, full-time employees are more than four times likely to get those options. Post- COVID, many employers will have had more experience and confidence to offer remote working options. Giving employees greater autonomy from working at home leads to better job satisfaction and reduced turnover, a significant benefit for employers.

Demand For Increased Working-At-Home Options

Before the coronavirus, many people sought flexible work options, including work-from-home.  It is a desirable company benefit for many candidates. Many companies have allowed their employees to work from home during the virus for the first time. 

As a result, management may be having positive experiences with remote working options. They have been able to test the resilience and productivity of their employees. With positive results, they may be more willing to encourage telecommuting. It is foreseeable that those employees who worked from home will not readily go back to working in an office environment only. Employers need to anticipate more demand for working from home options.

Increased Productivity

Many companies may have resisted allowing their employees to work at home to fear lost productivity or lack of essential technology. However, due to many employees who have been able to work from home, businesses may have realized some productivity benefits.

Those companies that had already deployed robust technology for their workers may have been more prepared for the challenges. Technology for employees requires support with web-based teleconferencing and video conference platforms. Other companies may have been more flatfooted and unable to move to a “Plan B.” These companies will need to further develop better disaster planning strategies.

Technology Is Readily Available But Are Protocols?

Telecommuting has better support from video conferencing providers–Zoom, RingCentral, Webex, DocuSign–than ten years ago. Firms can more readily address remote working with confidence if they put some protocols in place. Employees need to understand rules such as access to corporate files, availability to managers, pay for additional data, and other cost considerations.

Company Cost Savings

A typical employer could save an average of $11,000 annually per half-time telecommuting per employee based on estimates from Global Workplace Analytics. Those forecasted amounts are derived from increased productivity, lower real estate taxes, reduced absenteeism and turnover, and better disaster preparedness.

Employers are encouraged to use this Free Telework Savings Calculator which has received accolades from Congress. The comprehensive calculator allows employers to quantify benefits based on US census data from states, cities, or even counties and congressional districts with 59 variables. For example, to calculate real estate savings, employers can change assumptions based on average office size, $/square foot, person/desk ratio, and other related variables and locations.

A Societal Benefit

For companies in congested traffic areas such as Los Angeles, offering alternative working options for employees would be seen as an eco-friendly move. All organizations need to play their part in battling climate change by reducing their carbon footprint. Besides day-to-day commuting, there may be reduced business travel to meetings and conferences, reducing our energy consumption.


Final Thoughts

The rapid move to remote working for many organizations may enhance their bounce back faster post the virus. Covid-19 may serve as the tipping point for a trend towards alternative working arrangements that were already in demand. We will likely see that the benefits experienced by employees and employers are worth the downside of giving their workers more autonomy and improved job satisfaction. This virus may have crippled our economy, but there may be some positive outcomes as America goes back to work.

Thank you for reading!

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