Journal of Financial Planning: December 2020
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Some planning meetings with clients impacted by the COVID-19 pandemic might be different than they were last year at this time.
Recent reports find that nearly 13 million people are unemployed. Some have exhausted their savings. Others are cashing in their stocks. Others have moved in with family and sold their primary residences.
“Many households have experienced income shocks and have burned through their cash reserves,” said a Morningstar article titled “COVID-19 and the Future of Financial Planning.”
What does this all mean for financial planners? It means you might have to shift your clients’ planning goals a bit moving forward.
There might be more of a focus saving accessible cash. Perhaps your client got a promotion and a raise in this time, but despite this, things might still be shaky on the job front. Upping the allocation to the emergency fund might be more important than upping the contributions to the 401(k) should a sudden job loss occur. In these times of constant transition for your clients, it’s important to focus on the emergency savings that they can draw upon in case of a sudden job loss.
“An emergency fund serves as a home storm shelter,” writes Sharif Muhammad in the Business Insider article, “4 Significant Ways COVID-19 Has Changed My Financial Planning Advice to Clients.” “While it doesn’t provide 100 percent protection from the storm, your chances for survival increase substantially by having one and utilizing it properly during the storm.”
The Morningstar article noted that high-income workers or those who have more specialized careers, should amass a larger fund “because such positions typically take longer to replace than lower-income, less-specialized jobs.”
There might only be one spouse with a stable paycheck. If your couple clients were lucky enough to hold on to at least one job, there might be some planning around a tight budget due to a single-income household.
We might have to rethink health insurance. Now that open enrollment is coming around, explore with your clients the coverage they might need. It might be beneficial for your client to explore a more comprehensive plan versus something like a high-deductible health plan in these times.