Financial Lessons From Covid
Does anyone remember a month ago?
It feels so far away, doesn’t it? It’s only been about one month since the whole Covid-19 pandemic really made its impact in the United States. Honestly, it feels like it’s been significantly longer since anything was considered “normal”.
It definitely has not been normal. As I mentioned in my last post, Covid-19 impacted nearly every aspect of our lives. And if you’re like me getting your news from the internet and TV, it’s all doom and gloom. Death and destruction. Financial ruin. I try not to get caught up in all of that.
Personally, I think we’re gonna get through this. So I want to know what lessons I can learn from this experience and take with me into the future. So far there have been quite a few. Especially financial ones.
Let’s focus on those for now.
Lesson 1: Medicine Isn’t Recession-Proof.
Way back when I was just a wee pre-med student figuring my life out (as opposed to now being a big attending physician figuring my life out), I heard the same advice over and over again.
“If you go into medicine, you’ll always have a job. Everyone needs a doctor.”
This is actually true during covid. For those of us practicing in the hardest hit areas, anyway. The hot spots like New York and Florida. But for the rest of us, Covid has been the opposite.
Instead of hospitals facing huge patient surges, desperate for ventilators, most of us outside of the hot spots have been preparing for the surge and waiting…and waiting.
In the midwest, for example, doctors have shut down private practices. Elective surgeries have been postponed. And some emergency room volumes are down by >1/3.
Less procedures and less patients means significant pay cuts and reductions for those of us who always felt such high job security. Those of us convinced we’d always have a job, even in the worst of times.
It looks like we were wrong. Medicine isn’t quite so recession or disaster proof. Even we can lose our jobs in a crisis and have to consider filing for unemployment.
How do you prepare for something like this? if medicine isn’t forever, what can you do?
FIRE: Financial Independence Early Retirement
First, this covid-19 recession really shows the value of FIRE. Imagine for one second that you don’t need your job. That every year you automatically make all of the money you need before ever lifting a finger. That’s FIRE.
I’ll dig into this concept more in a later post as planned before the coronavirus pandemic hit, but here’s the short version of it for now.
FIRE stands for Financial Independence, Early Retirement. It’s the idea that your investments (real estate, stocks, bonds, businesses, etc.) automatically generate enough money to support you.
For example, let’s say you spend $100k per year. Multiple that by 25 and you get your FIRE number. Meaning that with $2.5 million invested, a global pandemic could force you to lose your job entirely, and you’d be fine financially.
The big problem is…FIRE is a long term goal.
It doesn’t help much right now that pre-covid I’m at least 5 years away from my own FIRE number. And with Covid, I might be even further away. But this crisis has again shown the importance of FIRE as a goal to work towards. Once you get there, a coronavirus-like crisis wouldn’t hit quite that hard.
Diversify Yourself
Hopefully you’re familiar with the concept of diversification. Maybe a financial advisor told you “You can reduce risk across your entire portfolio by diversifying into multiple sectors”. Or maybe your parents told you not to put all your eggs in one basket.
As investors, we tend to think of diversification as a way to reduce risk, but the same principle applies to you, individually, as well.
Medicine does a great job at teaching us to be really good at one thing. This is great when taking care of patients, but not so great when you’re figuring out how to invest, negotiating contracts, or…well…facing a global pandemic. If all you can do is round in the hospital or do elective surgeries, this pandemic hurts.
That’s because your skill set is limited. Deep, sure, but limited.
Diversifying yourself means expanding that skill set to include other areas, both in and outside of medicine.
For example, take this nurse friend of mine. He’s a good nurse, but also very good at videography and social media marketing. So while most of our nurses we work with have been afraid of their hours getting cut or not making rent in a few months, he’s been building up his instagram following and offering videography services to Netflix. When our hospital closes and the rest of us lose our jobs, he’ll be fine.
Now, ok, it’s a bit of an extreme to ask an orthopedic surgeon to start his YouTube career during the covid pandemic. But it’s not entirely unreasonable to think that surgeon might have some other skill outside of medicine. Maybe he has a real estate license and a couple of rental properties. Or he’s good at woodworking and sells his work online. Or maybe he started an online blog about being a doctor (that so far doesn’t make any money).
It could be anything, really. Just something outside of medicine that you could lean into more when a crisis like this hits.
But I get it. Maybe that’s still too much, and I’m being unreasonable to think most doctors could start a side gig outside of the world of medicine. I mean, we all have, for the most part, spent more than a decade doing just one thing.
So do any options exist within with world of doctoring? Outside of the main gig?
Of course!
The big one that comes to mind right now is telemedicine. Especially during the Covid-19 pandemic. So far, rules and regulations around telemedicine has been relaxed significantly, making telemedicine clear next best option for docs who closed their private practice and know how to use a computer.
But there are plenty of other options, too. Legal work as an expert witness. Chart review for insurance companies. Question writing. Big Pharma consulting. And so much more.
Regardless of what you choose, the lesson still stands. You spent all that time becoming the best surgeon or internist possible. And that’s excellent. But if medicine falls apart, you’ll be glad to have something else to lean into.
Now, personally I believe that most physician gigs will go back to normal once this is over, but medicine is definitely not a 100% guarantee. Whether it’s from this pandemic, or being replaced by other healthcare professionals filling the role of physicians, or whatever other existential threat to medicine, the uncertainty is there.
It only helps to make yourself a little more valuable. And maybe brings a little extra money, too. So go ahead, broaden your skill set.
Pay attention
***I am not an accountant and I am not providing legal or tax advice.***
The third way to protect yourself and the one that’s most impactful right now during the coronavirus pandemic:
Pay attention
If there’s one thing boglehead index fund investors like to tell themselves when they set up their automatic monthly investments, it’s this…
“If it tanks, everyone else is tanking and we’re all screwed!”
Well, if there’s one thing that governments don’t want, especially during this pandemic, is complete societal collapse. So those bogleheads aren’t exactly wrong, and their do have a pretty big form of insurance in the federal government.
That’s what I’m asking you to pay attention to. Not the news, or the CNBC articles about JP Morgan Chase or Goldman Sach’s predicting the future. Not people on Facebook or Reddit furiously typing away about the end of the society and how the bottom hasn’t hit yet. Not even your friend texting you about how successful he’s been day trading for the past month (the text I just got while writing this article).
No, I mean the same way your parents told you to find and apply for as many scholarships as possible when you went to college, I’m telling you to now pay attention to the ways the federal government wants to give you free money.
Yes, the government wants to give you free money.
To get that money, you just have to attention.
I’ll dig in to these a little deeper later, but for now these are the current stimulus programs out there that help doctors the most.
– $1000 per employee up to 10 employees in the form of a forgivable grant.
2: The Paycheck Protection Program
– A loan of 2.5x average monthly payroll costs that can be forgiven if you follow the rules
3: The CARES Act Provider Relief Fund
– Free payments (that do not need to be repaid) to facilities and providers who billed Medicare Fee For Service in 2019.
– $1200 “stimulus checks” to individuals who qualify.
– Most likely to apply to residents, but may apply to attendings <1 year out of residency who have not filed 2019 taxes yet.
Now, this list isn’t comprehensive by any means, and every program doesn’t apply to everyone. I just want you to realize that they’re out there. There are ways that the federal government is trying to support you through this crisis. If you don’t know about them, you’ll miss out.
It’s easy to stay up to date, too. Check out the white coat investor or physician on fire. Join a Facebook group like Physician Community or Physicians on FIRE. Or follow YouTubers like ClearValue Tax.
The information and the money is out there. All you need to do is pay attention and get it.
Lesson 2: I can’t predict the stock market.
A month ago, I had a plan.
I’m a new blogger working on growing this thing slowly. But emphasis right now on slowly. Essentially my only readers are the people I directly share this with and..well…me. Which is fine, but I do think it would be nice to get one or two regular readers. So I had a plan.
First, I was going to prove to myself that I enjoy blogging by writing the first 5 blog posts. Check.
Then, I’d write a guest post for one of the bigger FI bloggers out there. I won’t say who I planned on writing for, but here was the pitch:
As a relatively new attending, I’m in a unique position. Up until recently, I couldn’t play the stock market. I was just a resident making 50k/yr pre-tax. And unlike the docs who came before me, I became an attending right at the peak of the longest bull run in American history! What were I, and other new docs like me, supposed to do?
I had it all planned out. March 1 I would screenshot my personal capital showing me investing at all time highs. Then present my thesis that time in the market does beat timing the market and share my investment plan. I even had a clickbait-y twist planned as a follow up, where I’d show you that even though I made the right choices, I still lost $150k.
Then Covid happened and my guest post was dead!
Suddenly, the opposite strategy was right. The 2020 peak was the peak, and it all crashed by >30%! So much for my thesis. If I was really smart, I would have timed it better. I would have built an arsenal of cash in a high yield savings account then thrown it all into VTSAX on March 23rd, or even better, TSLA on March 18th.
I learned my lesson. The clues were there and they were obvious. I should have timed the market.
Wait…what?
That’s not the right lesson.
No, the real lesson is the opposite.
What I actually learned is this: I’m an average doctor, but I’m a terrible psychic. I can’t predict the future. Especially not when it comes to stocks. Stocks go up and stocks go down, and I know they tend to go up over time. But I can’t predict what’s going to happen today or tomorrow.
I learned I can’t time the market. And I’m probably better off making long term decisions rather than short terms moves.
When times are bad, I’ll be investing. When times are good, I’ll be investing. And maybe I’ll be over here tax loss harvesting when I can. Remind me in 10, 20, 30 years what the value of my stocks are.
Oh, and sometimes guest posts don’t work out. 🙂
Stick With The Plan
I said it before, but Covid news has been crazy. Whether it’s the quickest bear market in US history that bottomed out on March 23 2020 or the fastest bull market recovery less than two weeks later. It’s all over the place.
What’s worse is that while this is going on, you’re in quarantine. The world is screaming opportunity and fear and your usual distractions just aren’t there. It can get overwhelming.
The sky is falling! SELL! SELL! SELL!
Prices are rising! BUY! BUY! BUY!
Why not make it easier on yourself? Take emotions out of the equation and be a little more automatic.
Make an investing plan. And stick to it.
Decide way before the next pandemic hits that you’re going 100% VTSAX. Or 90% VFIAX and 10% Bonds. Or 50/45/5 with 5% reserved for stock gambling and day trading.
Whatever your plan is, write it down and stick to it. You’ll be much less likely to to make a bad decision in a time of crisis like this.
Continued Next Time…
Wow! Where has the time gone? I didn’t even realize we’re already >2000 words into this blog post.
If you’ve made it this far, thank you! I hope you learned something. And If you did, I hope you find this article helpful enough to share.
I’ll stop here for now. But continue with more financial lessons from Covid in my next post.
See you then!
