The Three Core Financial Challenges With the Pandemic
Summary - This is a realistic assessment of the challenges of this pandemic. What is the answer? see below
The pandemic has many layers of complexity to it. It touches every aspect of life. It is as political as it is personal. Having researched every aspect of this, I think we can narrow it down to three core challenges.
(1) The Domino Effect
The pandemic creates the domino effect of financial problems. Take, for instance, the person who rents. The individual renting the apartment can't make his or her rent payment. The Government steps in and places a moratorium on evictions. Meanwhile, because the renter cannot pay rent and the property owner can't evict, the building owner starts to fall behind on his or her payments. The building owner who doesn't have the protection of a moratorium on foreclosures loses the building.
Meanwhile, the bank is stuck with a building they can't sell and a loss of revenue because of the default. If that were happening in isolation, it would be no problem. Unfortunately, there are many examples of this occurring in every industry all over America.
(2) The Government can't bail out America
During the Great Recession in 2008, it was mainly the financial sector that was in trouble. The Government bailed out those businesses and industries that were affected. Unemployment, although high, was not at a crisis level. Today this isn't about an industry or two or even manageable unemployment. This is about America, where a significant percentage of businesses and individuals are facing financial trouble. The Government can only print so much money. The bailouts and trillions of dollars printed are a temporary fix. The challenges are more significant than temporary bailouts by the Government.
(3) We are in the eye of the storm
When a hurricane hits the coast, that first strike is destructive. Then there is the eye of the storm, which is calm. People are instructed to stay in their homes versus risking their lives and assessing the damage. Then as the hurricane moves on through the outer wall or second wave of destruction hits. We are in the eye of the storm. Things seem a little calmer. Yet we don't have a visual on the real effect of the initial hurricane strike. We just hear bits and pieces of stories. What if the destruction is higher than Wall Street forecasts?
So, what is the answer?
Assess your life for risk. Not just investment risk. The risk that you might be taking in all aspects of your financial life. It is the equivalent to boarding up your house and protecting your property. The individuals that take precautions are the ones who will be ok. Most importantly, don't forget that God truly is in control. Rather than dismissing that as a cliche, lean into it because it is true!
He says, "Be still, and know that I am God; I will be exalted among the nations; I will be exalted in the earth."
Proverbs 22:3 and Proverbs 27:12
"A prudent person foresees danger and takes precautions. The simpleton goes blindly on and suffers the consequences."
Bob Brooks is the daily host of the Prudent Money Radio Show. He writes about stewardship and financial topics Monday through Thursday each week. For questions or advice, feel free to contact Bob at 972-386-0384 or firstname.lastname@example.org.