So how are you doing with staying at home? Have you binge watched your favorite shows? Learned how important your child’s teachers are? Visited your friends and family by having a drive by — if you are allowed out of your home? How have you really done with social distancing? Are you really staying the requisite six feet away from people?
For me, after catching up on all my deferred home projects, re-watching all 10 episodes of the first season of Picard and seeing non-stop coronavirus media coverage, my key thoughts on the state of personal finance have been confirmed. What I have learned is that the vast majority of people in the developed world have been practicing Money Distancing for years and years. They probably didn’t know it was a practice they could implement, but that is what they did. In fact, compliance with this practice has been better than its cousin — Social Distancing.
People in the developed world have purposely stayed away from the details of managing their cash flow, being knowledgeable about money matters and looking to address financial protection needs. They are not fully aware of the financial risks they are subject to and what financial resources they need now and in the future to protect themselves and their loved ones. Instead of shielding them from the unpleasant details of money-related problems,
Money Distancing has caused the vast majority of people to be unprepared for the impact of the pandemic or another of life’s unexpected events.
As the pandemic has swept the globe, similar financial themes have arisen:
Insufficient or no health insurance coverage
Individuals applying for life insurance coverage they thought they would never need. This is like buying fire insurance as the flames engulf your home.
Family incomes in the best of times that were not sufficient to support chosen lifestyles
Health, life and other insurance coverage tied to jobs that have been lost leaving people uncovered for key financial risks
Lack of sufficient emergency savings to carry people over until they can go back to work. You have seen this everywhere. From lines at food banks to record numbers of people applying for government benefits.
High debt loads that need servicing
Investments too broadly exposed to the downfall in equity markets.
Governments are stepping into help as much as they can with stimulus payments and new or extended unemployment benefits. I am not saying that anyone could have foreseen the dramatic economic impacts of the pandemic, but the pandemic has fully exposed the weak financial foundations of families. It has brought into clear focus that most families are not financially self-reliant.
As we emerge from this global nightmare, people will need to spend more time on managing their personal financial risks and details. They need to end Money Distancing. Financial self-reliance must become a habit that we all embrace. You just never know when another unplanned event will take place.
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