One of my favorite quotes that sums up last year is, “2020 is like looking both ways before crossing the street then getting hit by an airplane.”
I just got my first vaccine shot this week and I’m hoping Covid-19 will be in our rearview mirror soon. But as Winston Churchill said, “Never let a good crisis go to waste.” So, I’ve been reflecting on the lessons that came out of this pandemic and how they can be applied.
First, some people tell me they are going to take social security as soon as possible because it’s slated to start running out of money by 2035. This could be a really bad decision because each year you delay taking it, the amount goes up around 8%. But, of course, as the logic goes, if the politicians let it run out of money, we will regret not taking it sooner.
But if there is one certainty that came out of 2020, it’s that politicians from both sides of the aisle excel at throwing money at people. After watching stimulus checks, enhanced unemployment benefits and PPP loans flow into the economy, does anyone think that politicians would let the most popular entitlement ever run out of money?
I don’t think letting the low risk of politicians getting religion on deficits and cutting social security should impact one of our most important retirement decisions. You may have good reasons to take Social Security early, but I don’t think the fear of the money running out should be a deciding factor.
Second, I think it’s important to think about what we learned about how fragile the supply chain is. Remember how just a few short months ago we had big shortages of everything from PPE and swabs to toilet paper. My wife and I ordered some furniture last year that took over four months to get delivered due to supply chain disruption. It would normally be shipped in a week. I have friends that have been waiting months for a refrigerator. The disruption is very real for many products.
I used to read books about coming depressions that had a common solution to buy gold. I’ve discounted most of that advice, but I’ve held onto the idea that we should have several weeks of food and essentials stored up. The pandemic reinforced that belief.
I’m also somewhat jaded by some of the cyber security training I get as a banker. The risks I learn about from bad actors hacking into our infrastructure are unnerving. Knowing how disruptive a cyber war could be to our economy gives me a reason for prudent precautions about storing some essential supplies.
Third, the risks of owning individual stocks compared to low-cost diversified index funds was highlighted by the pandemic. The global market crash started on February 20 last year. It was rapid and severe, but short lived. The bull market resumed on April 7. The S & P 500 had an annualized return including dividends of over 16% in 2020. An incredible return considering what the economy went through.
However, for some individual stocks, the bear market continues. If you owned cruise lines, airlines or hospitality stocks, you are probably still underwater from where you started 2020. It’s not a sin to own individual stocks, and many do well with that strategy, but for those of us who want to lower risk through diversification, 2020 reinforced our thinking.
Fourth, the pandemic lockdown revealed to many of us just how much we can cut our discretionary spending. Travel, eating out, entertainment and gasoline all hit rock bottom levels in the Kesler household. I bet you found your expenses fell dramatically too in these areas.
Not everyone is in a position where they need to pinch pennies, but it was eye opening to see just how dramatically the family budget can be cut. Of course, my book budget and streaming services went up, but not nearly as much as we saved in other areas.
As the pandemic eases, this is a great time to consider what we really missed and want to spend money on again. But also, what expenses turned out to be not all that important that can be permanently cut.
Finally, let me give a shout out to my favorite form of entertainment—hiking. Living in a beautiful part of the world helps.
2020 provided more opportunities than normal to enjoy the simple pleasure of exploring the mountains with my wife… without a mask. After sitting through a day of Zoom meetings, nothing refreshes me more than getting out into nature.
And, it was encouraging to see the trailheads much busier than I’ve ever seen them. Families took advantage of a safe and healthy way to reconnect with nature.
I know every location doesn’t have a Yellowstone National Park nearby, but even cities try to provide green space for getting people outside. I hope the increase in outdoor recreation will continue long after the lock down is ended. It is so much more beneficial for mental and physical health than trying to relax by spending time on social media.
I need to hit the send button, but I’d love to know what your take-aways are from your experience in the pandemic.
Joe Kesler
Joe, We definitely have learned a few things of note to us. Since we didn’t travel as much as we had hoped we took up new hobbies and expanded others. Gardening was expanded. We grew many more vegetables and herbs. We found great fun in getting our hands dirty and finding recipes to enjoy the food we grew. We also enjoyed sunrises and sunsets more consistently! Life’s simple pleasures are truly wonderful where ever you are. We also exercised more on the inside equipment. It is not as much fun as enjoying walks by the rivers or hiking the local trails but it good to keep moving! It is great to hear you have received your 1st vaccine. Let’s hope the vaccine starts getting things back to normal sooner.
Brian, I love that list of things you took up to make the most of the lockdown. I would bet many of those new hobbies will continue even if things get back to “normal.” Great positive approach to life to let obstacles be a road to new opportunities.
I hope I live long enough to see Social Security run out of money.