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Five Lessons

Joe Kesler

COVID-19 WILL SOON, I hope, be in the rearview mirror. But as Winston Churchill said, “Never let a good crisis go to waste.” Here are five lessons I’m taking away from the pandemic:

1. Government spending. Some folks tell me they’re claiming Social Security retirement benefits as soon as they’re eligible because the system’s trust fund will be depleted within the next decade or so, at which point benefits could get cut. Claiming Social Security early could either be a really bad decision, because benefits go up some 8% for each year you delay, or it could be a really smart move if the politicians let the system run out of money.

My reaction: If there’s one certainty that came out of 2020, it’s that politicians on both sides of the aisle excel at throwing money at people. After watching stimulus checks, enhanced unemployment benefits and Paycheck Protection Program loans flow into the economy, does anyone believe that politicians would let our most popular entitlement program run out of money?

I think there’s little risk that politicians will get religion on deficits and cut Social Security—and we shouldn’t let that possibility impact one of our most important retirement decisions. You may have good reasons to take Social Security early, but I don’t think fear of possible benefit cuts should be a deciding factor.

2. Economic fragility. Remember how, just a few short months ago, we had big shortages of everything from hand sanitizer to swabs to toilet paper? My wife and I ordered some furniture last year that took more than four months to get delivered due to disruptions in the supply chain. The furniture would normally have been shipped in a week. I have friends who have been waiting months for a refrigerator. The disruptions are very real for many products.

I used to read books about the “coming depression.” I’ve discounted most of the advice, such as suggestions to load up on gold. But I’ve held onto the idea that we should have several weeks of food and essentials stored up. The pandemic has reinforced that belief.

Some of the cybersecurity training I’ve received has also been a wakeup call. The risk of bad actors hacking into our electrical grid and other infrastructure is unnerving. Knowing how disruptive a cyberwar could be to our economy strikes me as another reason to stockpile a few weeks of essential supplies.

3. Diversification’s benefits. The global stock market crash started on Feb. 20 last year. It was rapid and severe, but short lived. In fact, the S&P 500 went on to return more than 16%, including dividends, in 2020—an astonishing performance considering what the economy went through.

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But for some individual stocks, the bear market continues. If you own cruise lines, airlines or hospitality stocks, you’re probably still underwater compared to where you started 2020. It isn’t a sin to own individual stocks and many do well with that strategy. But for those of us who prefer to lower risk through broad diversification, 2020 provided further validation.

4. Unnecessary spending. Last year, spending on travel, eating out, entertainment and gasoline all hit rock-bottom levels in the Kesler household. Yes, our spending on books and streaming services went up, but not nearly as much as we saved in other areas. It was eye-opening to see just how much the family budget could be cut. I bet you found your expenses also fell sharply.

As the pandemic eases, this is a great time to consider what things we really missed over the past year and are anxious to spend money on again. But it’s also a chance to ponder what expenses proved to be unimportant—and perhaps should be permanently cut from our budget.

5. Simple pleasures. Last year provided more opportunities than normal to enjoy the simple pleasure of exploring the mountains with my wife—and without a mask. After sitting through a day of Zoom meetings, nothing refreshes me more than being out in nature.

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 not every location has a Yellowstone National Park nearby. Still, even cities provide green space and the chance to get outside. I hope folks will remember how great it’s been to escape into nature over the past year—and that the increase in outdoor recreation will continue long after the lockdown is over.

Joe Kesler is the author of Smart Money with Purpose and the founder of a website with the same name, which is where a version of this article first appeared. He spent 40 years in community banking, assisting small businesses and consumers. Joe served as chief executive of banks in Illinois and Montana. He currently lives with his wife in Missoula, Montana, spending his time writing on personal finance, serving on two bank boards and hiking in the Rocky Mountains. Check out Joe’s previous articles.

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Peter Blanchette
Peter Blanchette
6 months ago

Good points. How about 3 more? 6)Universal healthcare so that when someone loses a job because of a pandemic or other reasons they don’t lose healthcare coverage, 7) Universal broadband so that everyone can stream Boston Symphony Orchestra and be able to do other things during the next pandemic and 8)a proper Child Tax Credit regime so that families can feed their kids during the next pandemic and during normal times and do not have to go to a food pantry. Too much socialism?

Roboticus Aquarius
Roboticus Aquarius
6 months ago

They say concentration is for making money and diversification is for preserving it, and I understand the thought process behind that. However, I think diversification works pretty well on the way up as well – it’s slower, but more certain also.

Between stocks, real estate, and our small business, it seems like one or the other is always doing well enough to make up for any shortfalls elsewhere.

Joe Kesler
Joe Kesler
6 months ago

Dave you’re not a conformist. I think the government numbers show a big drop off happened in consumer spending and savings went up, but it’s good a few like you kept some money flowing through the economy. Thanks for your contribution to the economy!

Mr Moderate
Mr Moderate
6 months ago

Thanks, Joe. Good points and I heartily agree. Regarding #5, hiking in nature not only has the benefits you cited but also has lowered my blood pressure in 3 months. I’m off 3 meds (money saved). Plus I devote less time for useless tv and doomscrolling which lowered my stress over things I have no control. Nothing like substituting hiking for increased bp, increased stress, paying more monthly for pills. It’s a worthwhile trade-off.

Joe Kesler
Joe Kesler
6 months ago
Reply to  Mr Moderate

Congratulations Mr Moderate on your positive changes. Those changes you made are inspiring by taking a bad situation and using it to upgrade your life and health. Well done!

Rick Connor
Rick Connor
6 months ago

Great article, Joe. #1 is an interesting perspective on a challenging issue. I agree with your assessment, but think the government will wait till the very end to make any changes to SS.

Joe Kesler
Joe Kesler
6 months ago
Reply to  Rick Connor

Thanks Rick. It’s perplexing to me that we are throwing money at so many things and even talking about forgiving student loans, while the social security fix doesn’t even seem to be on the radar. I’m sure it will get done, but who knows when.

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