Sharon Marchisello's Blog, page 5

Savings During the Pandemic

It's been four months since our lives were turned upside down by the coronavirus pandemic. Dream vacations have been canceled. Weddings, commencement ceremonies, and reunions didn't happen. People have lost jobs, opportunities, businesses, loved ones, and even their lives.
The impact of lockdown, hiding from an invisible but deadly virus, has varied from total devastation to mere inconvenience. I'm fortunate—privileged—that my suffering leans much closer to inconvenience.
The Fourth of July wasn't the same in our town without its annual parade and fireworks display. My latest mystery was published in December, and I missed conferences, book signings, and author events where I would have had the opportunity to connect with readers and promote my work. We were booked on a cruise for April that didn't sail. Trivial disappointments compared to the real problems many others are experiencing.
On the bright side, I'm saving money. Lots of money on travel, as we normally take several cruises or other international trips a year. And I usually attend a couple of writers' conferences, where my expenses exceed what I earn back in book sales.
We've spent no money this year on movies in the theater, plays, concerts, or sporting events. My husband travels for work, so we don't eat out that much when he's home, but with many restaurants still closed to dining in, we're eating out even less.
Gasoline is cheaper these days, and I'm buying less of it. I'm not driving my car as much as I used to—my meetings that still take place are now on Zoom—so I can probably wait longer until the next oil change.
I haven't purchased new clothes or make-up since before the pandemic. I don't get out much, and make-up soils my mask, so why even put on lipstick and foundation when I go to Costco? And the Zoom camera feature is optional.
Hair salons have reopened, and I should really go get a haircut, but I'm hesitant. On one hand, I feel I should support the economy, help out those businesses that were forced to close, those employees who had to give up their livelihoods. On the other hand, I've been cooped up so long that I'm leery of nonessential public contact. I feel I should do my part to stop the spread of the virus so life can one day return to "normal"—if that's even possible anymore.
How has your life been affected financially by the pandemic? I'd love to hear your comments.
Sharon Marchisello is the author of Live Well, Grow Wealth
Sign up for her newsletter at sharonmarchisello.com

Countdown to Financial Fitness: Should You Take an Early-Out Package?

Countdown to Financial Fitness: Should You Take an Early-Out Package?: Many businesses, particularly those in the travel industry, have been hit hard by the coronavirus pandemic. Thanks to government assistanc...

Should You Take an Early-Out Package?

Many businesses, particularly those in the travel industry, have been hit hard by the coronavirus pandemic. Thanks to government assistance, companies accepting aid have postponed massive layoffs and pay cuts. But some are now trying to reduce their payrolls by offering early-out incentive packages.
I spent my career in the airline industry and witnessed many ups and downs. Every few years, the company offered early-retirement and voluntary-departure packages. Sometimes, they're very tempting.
In 2008, I took an early retirement package. It was right for me, and most of the time, I haven't regretted my decision. I did get chilly feet when the financial markets crashed after the ink was dry on my signed severance papers, and my retirement accounts were suddenly worth a lot less than before. Fortunately, my company invited me back to work as a contractor several times over the years, which enabled me to bring in extra income to rebuild and increase my investments instead of drawing them down.
My husband is now faced with a similar decision. To stay for an uncertain future? Or take a lucrative package now and go?
Here are some considerations if you're faced with the decision about an early-departure package:·       What are you leaving behind?We spend so much time at work that it's hard to separate our professional life (camaraderie with colleagues, the vocabulary of the trade, inside information, perks of the job) from who we are outside of our careers. Of course, some of your work friends may leave, but some will stay, and relationships will change when you're no longer an insider. Do you enjoy your job? Will you miss it? If you stay, there might be some great promotional opportunities resulting from vacancies left by senior employees and grass-is-always-greener go-getters. On the other side of the coin, things may get worse and you might get laid off—without an incentive package. What is the company's prognosis?·       What comes after?Will you feel lost without a workplace to go to every day? Or do you have plenty of hobbies and social activities to fill your days? If you're too young for Social Security and don't have a pension—and even if you can draw both—you might need to get another job. Have you researched the job market? At the beginning of 2020, unemployment was historically low and jobs were plentiful. That changed overnight. Even though recovery is looking better than expected, there's a lot of competition out there, and you might end up settling for a position much less attractive than the job you're leaving. Have you fine-tuned your resume and honed your marketable skills? Have you built your network?·       What are they offering?Regular retirement benefits most likely won't change if you decide to wait, unless certain perks are being discontinued. In the "enhanced retirement" package my husband is considering, a severance check equal to six months' salary is included. A severance payment can be a great jumpstart for an emergency fund if you don't have one. But keep in mind, payroll taxes will be deducted, so the actual amount will seem much smaller than promised. My husband's package also comes with some positive-space passes, which are like gold for airline employees used to traveling space available on crowded airplanes, and not looking forward to being demoted to a lower standby priority after retirement. However, there is a finite number of confirmed tickets; it's not an annual allotment.·       How will you manage without your major source of income? Can you afford to live without a paycheck? In my case, we were debt-free and had recently paid off our mortgage. We didn't have any children to educate. If you have a lot of bills, think twice about leaving unless you have a new job lined up. If you're lucky enough to have a pension and are ready to start taking Social Security, will that income cover your expenses and maintain the lifestyle you desire? If not, how will you make up the difference? Can you work part-time, or provide contract services? Do you have investments you can tap?·       What will you do about health care?In our country, this can be a deal-breaker for many would-be early retirees, where health insurance coverage is still mainly tied to employment. When I retired, my husband was still working, and I was eligible to be covered under his plan. Now we're both eligible for Medicare. Nevertheless, premiums must be paid, and Medicare doesn't cover everything. Most retirees purchase supplemental insurance or a Medicare Advantage plan to bridge the gap. And the array of choices will give you a headache. My husband's enhanced retirement package includes a generous Retiree Medical Account (RMA). Similar to a Health Savings Account (HSA), it can be used to pay qualified medical, dental, prescription drug, and vision expenses, including Medicare premiums. Unlike the HSA, which the insured person controls, the RMA is controlled by the company. The account owner pays for the services upfront and then submits a claim for reimbursement. Still, an excellent incentive, provided the company continues to follow through with the obligation.
If you're faced with a decision about whether to take an early out/retirement/severance package, take your time to read all the fine print. Weigh the pros and cons. Write them down.
Talk to your colleagues. Keep in mind, everyone's situation is different. But they may uncover some concerns or benefits you've overlooked.
Discuss the situation with your family and make sure they are comfortable with the potential lifestyle changes ahead. If you don't already work with a financial planner, now might be the time to talk to one. Evaluate carefully so you don't regret giving up a valuable career before you’re ready, or passing up the opportunity of a lifetime.
What are your thoughts about leaving a job at this time? I'd love to hear your comments.
Sharon Marchisello is the author of Live Well, Grow Wealth.
Sign up for her newsletter at sharonmarchisello.com

Countdown to Financial Fitness: What to do with Your Stimulus Check

Countdown to Financial Fitness: What to do with Your Stimulus Check: Many Americans will be getting, or have already received, a check—or direct deposit—from the U.S. government this month. These Economic I...

What to do with Your Stimulus Check

Many Americans will be getting, or have already received, a check—or direct deposit—from the U.S. government this month. These Economic Impact Payments were authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in an effort to mitigate the fallout from the shutdown of our economy in response to a global pandemic.
For some workers, unfortunately, it won't be enough. Some businesses were just too fragile to hang on, to continue to pay overhead when their income stream halted, and the jobs they'd generated won't come back. Unemployment, once you can push through the crowds and jammed phone lines to file, only replaces a portion of your salary. Thousands of workers and entrepreneurs who were overextended and lived paycheck to paycheck are in trouble.
But for others, the stimulus check represents a windfall. I've written several posts with suggestions about what to do with a windfall. In my book Live Well, Grow Wealth, I devote an entire chapter to the importance of maintaining an emergency fund (three to six months' living expenses in a low-risk, liquid investment like a savings account or money market fund) and I advocate using a windfall to jumpstart your emergency fund if you don't already have one.
Other uses for a windfall I've recommended include paying down debt or contributing to your retirement fund. This year, the deadline for making 2019 contributions to an IRA (Individual Retirement Arrangement) or HSA (Health Savings Account, available to policyholders of certain high-deductible health insurance plans) has been extended to July 15.
However, I'm not going to make those recommendations for your stimulus check. Its purpose was to breathe life into our dying economy. So, if you don't need the money to cover basic living expenses, spend it!
Get started on your Christmas shopping. Buy some books from your local bookstore. Eat at your favorite local restaurants; if they're not open yet, order take-out or have your meal delivered. Get your hair done once it's safe to do so. Purchase that new appliance or outfit or toy you've been dreaming about. Buy some plants from your local nursery to spruce up your yard.
Nonprofit organizations are hurting. Fundraising events have been canceled, and charitable giving dries up faster than discretionary spending when people are struggling to feed their families. So, if you feel uncomfortable spending the stimulus money on yourself, donate to your favorite local charity.
If everyone puts what they can back into the economy, perhaps we'll avoid another Great Depression-like scenario once we finally come out of this pandemic.
What are your plans for spending your stimulus check? I'd love to hear your comments.
Sharon Marchisello is the author of Live Well, Grow Wealth.
Sign up for her newsletter at sharonmarchisello.com

Countdown to Financial Fitness: Retiring During a Crisis

Countdown to Financial Fitness: Retiring During a Crisis: This was going to be the year. Your 401k was robust, you'd put in your time, and a leisurely retirement was on the horizon. Maybe you ...

Retiring During a Crisis

This was going to be the year. Your 401k was robust, you'd put in your time, and a leisurely retirement was on the horizon. Maybe you even had an exit date and celebratory travel plans.
And then the coronavirus invaded. Words like "social distancing," "shelter in place," and "flatten the curve" entered our vocabulary. Masks and gloves became part of our wardrobes. Thriving businesses closed their doors. Jobs disappeared. The stock market tanked. Suddenly, your nest egg doesn't look so secure.
I faced a similar situation in 2008, on the cusp of the Great Recession. After years of working in the beleaguered airline industry—where we suffered pay cuts while employees in other industries earned raises, where I dodged the ax time and time again amid multiple reorganizations—I decided I was going to accept a retirement-incentive package as soon as I was eligible. And in early 2008, I had the right combination of age and years of service to take advantage of a buy-out.
Years of frugal living had enabled us to pay off our mortgage. We were debt-free and had no children to educate. Our investments were doing great. My husband's job was safer than mine, and I could be added to his health insurance plan. So, I signed the papers.
And then the housing market collapsed, taking the stock and bond markets along with it. Suddenly my retirement accounts didn't look as hardy.
I knew better than to yank my money out and cement my losses, but going off the payroll took away my ability to keep contributing to my 401k and dollar-cost average, taking advantage of fire-sale prices.
Reneging on my commitment to accept the early-retirement package wasn't an option nor did I want it to be. But, luckily, my company offered me the opportunity to work short-term as a contractor in one of my old departments while still drawing my pension. Contract jobs off and on for the next few years enabled me to shore up my portfolio and participate more in the market's recovery.
But what can you do now if you're in that predicament—planning to retire and suddenly not as prepared as you'd thought? In a few short weeks, we went from almost full employment to record unemployment claims, so postponing your decision to leave or picking up part-time work might not be possible.
Hopefully, you've already planned for survival without your salary. You've paid off or greatly reduced your debts. You've anticipated expenses, decided on the lifestyle you want in retirement, and figured out how to finance it. You've moved your investments to a more conservative allocation, so you don't have to sell volatile assets at a depressed price to cover living expenses. 
But still, if most of your retirement income was set to come from your investments, you might need to make adjustments. Here are some suggestions:   
Review your asset allocations. After the drastic drop in the stock market and interest rate cuts, your investment distributions might be out of balance. Ensure that you've adjusted to a mix suitable for someone drawing down assets instead of accumulating them.Make your withdrawals from cash accounts, or mutual funds with the most stable values. This will give your more aggressive holdings time to rebuild their worth.Tighten your belt; comb through your budget and look for areas where you can reduce spending without compromising your values.Postpone major trips and events. (The pandemic might have already wreaked havoc with your plans for a big retirement bash or a family cruise.)Clean out your garage, your attic, your spare bedroom, and have a yard sale. (If it's allowed in your community and you practice social distancing!) Or sell some possessions you don't need anymore on e-Bay.Consider taking Social Security earlier. But be careful; be sure you really need the money now. If you're under full retirement age, you'll be permanently sacrificing some of your future earnings. The longer you wait to file (up until age 70), the bigger your checks will be when they finally come.  
Life is full of surprises, and the best-laid plans can sometimes fall by the wayside. But the more flexible, patient, and prepared you are, the better your ability to adapt.

What are your thoughts about planning for retirement? I’d love to hear your comments.

Sharon Marchisello is the author of Live Well, Grow Wealth.
Sign up for her newsletter at sharonmarchisello.com

Conserving Resources During a Pandemic

Financial experts preach about the need for an emergency fund. If your income stream suddenly ended because of lock-downs forced by the coronavirus pandemic—with no assurance of when it will restart—and your expenses continue, you’re probably dipping into that emergency fund now. The more robust, the better.
As a reminder, an emergency fund is three to six months’ living expenses tucked away in a liquid, low-risk asset like a savings account or money market fund. Not the stock market.
Unfortunately, nearly a third of Americans have no emergency fund and many more live paycheck to paycheck. When the paycheck abruptly stops, they’re in real trouble.
Unemployment, some debt forgiveness or deferment, and the $1200 relief check from the federal government will help many, but for others, it won’t be nearly enough.
Depending on how long this pandemic and resulting economic fallout last, there will be businesses that fail. Not every job will come back.
If you’ve lost your job or business and you don’t have an emergency fund, it’s too late to start one now. But there are a few things you can do to conserve resources and stay afloat:
·        Refrain from unnecessary purchases. With malls and many retail stores closed, this is easier than ever before. But if you’re addicted to online shopping, step away from the computer.·        Don’t be a hoarder. Buy only the supplies you and your family will need for the next few weeks, and perhaps a little extra if you anticipate problems getting back to the store for reinforcements. You won’t tie up so much cash, and you’ll be a better citizen.·        Conserve energy. With fewer places to go now, it’s easy to save money on gasoline for your vehicle. At home, turn off unnecessary lights and appliances, keep the temperature inside as close to the outside temperature as you can stand. (Luckily, it’s spring in most places, so we don’t have to spend a lot heating or cooling our homes right now.)·        Conserve water. Turn off the faucet while you’re brushing your teeth or sudsing your hands for 20 seconds. In the shower, turn off the water while you shampoo or condition your hair. If you have some downtime at home, fix leaks and cracks.·        Don’t waste food and paper products. You may have already figured out how to ration toilet paper!·        Cook more from scratch. There are plenty of free online videos that teach you how to prepare easy, nutritious, and economical dishes for your family. Take advantage of seasonal fresh produce that is still on sale. Store leftovers promptly, label, and use.·        Negotiate with creditors about waiving late fees, lowering interest rates, and/or relaxing repayment terms. They know everyone is hurting and most should be willing to work with you if you’re sincere about your obligations.·        Defer discretionary expenditures. Some of these decisions may have already been made for you: large social events, vacation travel, visits to amusement parks, etc.·        Leverage credit. Normally, I don’t advocate taking on more debt, except as a last resort. These are desperate times, and debt may be your last resort. Make sure it’s for a “must-have” rather than a “want-to-have.” And pledge to start paying it off as soon as you’re back on your feet.
Life may look bleak for the moment, but one day—hopefully sooner rather than later—this pandemic will be over and the economy will begin its recovery. As soon as you’re able, start an emergency fund, so you’ll be better prepared next time!
What are your thoughts about emergency funds? I’d love to hear your comments.
Sharon Marchisello is the author of Live Well, Grow Wealth.
Sign up for her newsletter at sharonmarchisello.com

Countdown to Financial Fitness: Conserving Resources During a Pandemic

Countdown to Financial Fitness: Conserving Resources During a Pandemic: Financial experts preach about the need for an emergency fund. If your income stream suddenly ended because of lock-downs forced by the co...

Countdown to Financial Fitness: Investing in the Age of Coronavirus

Countdown to Financial Fitness: Investing in the Age of Coronavirus: The stock market continues its roller-coaster ride, previously solid industries disintegrate, and small businesses collapse like a row domin...