The Personal Finance Mistakes I Made During the Covid-19 Stock Market Crash

My takeaways from this crisis.

This article is not about the stress people are feeling and the worry people have about their relatives and their health. My mother is undergoing cancer treatment and I am extremely worried about her heath.

This article is about my personal financial situation and my observations.

I thought I should mention this first because focusing on money during this stressful time is callous. That being said, I don’t know how to help people be less stressed or worry less. Maybe I can help people plan their finances better in the future.

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I would categorize myself as optimistic but cautious. After being laid off repeatedly in the Midwest, I know my personal financial planning had to change. When I move to the West Coast, I told myself I would do a better job with my finances. The last two weeks have showed me that I could have done a better job.

Betting on the stock market

I know I needed to save three to six months of money to cover expenses if I ever lost my job. After I was laid off in 2010, I know I needed a nest egg. I remained without work for six months and survived on unemployment and credit cards.

Index funds are supposed to be a safe way to invest in the stock market without losing your shirt. The fees are low. The risk is low compared to individual stocks. Experts say Index Funds are a smart option for individual investors.

The market loses this month have been catastrophic. My investment which was a plump $16,000+ is now a skinny $12,000. 25% of the value of my portfolio is gone.

If I need to liquidate that investment it is going to hurt. Unfortunately, as I will mention later, the need to liquidate to help my family might be unavoidable.

Investing too early

For the first week in March, the market moved up and down and it seemed like the worst was over (I said I was optimistic).

When the market dropped 10% on March 8, I thought it was near a low. I decided to invest $1,000 in cash. I was happy when the market rallied the next day and my investment made 5%.

I realize now we were only starting to see the effects of the virus on the market. Systems were failing in succession. Tech companies started working from home. Sporting events and concerts are canceled. Schools closed. Restaurants closed.

What started out as a travel ban has turned into the rapid destabilization of the American economy.

I should have realized the market was going to dip way more than 10%. I should have been more liquid (more cash funds).

When the market drops 7% they implement a circuit breaker. Trading is stopped for 15 minutes so people will stop panicking. I should have implemented my own circuit breaker and stopped trading for a month or two.

Living with 20% Unemployment

I work in an essential field. None of our company locations are going to be shut down. People need our industry in times of crisis.

My wife and my two brothers work in the restaurant industry. The governor has ordered restaurants closed. I would estimate that 95% of service workers in the state of Oregon were laid off this week. Thousands of people are out of work.

My sister is a teacher at head start. They closed the schools and they told the teachers that they are done for the rest of the year. She usually goes back to work in September after collecting unemployment for the summer. This year, her semester ended in March not June.

My brother’s fiance is a wedding planner. Not a lot of people are planning weddings when you can’t meet in groups larger than 25.

Out of all my siblings and their spouses, I think I am the only one with full-time employment. I do not know what sort of support system they need and if they are going to be OK. I am sort of freaked out.

Now that I don’t have any discretionary income and re-balancing my payments and goals, I am worried about having to support my extended family. I’m not even sure how to talk to them about what they need.

Lessons learned

I think the biggest lesson I learned is to have more in a savings account and not invest so heavily in the stock market. I have $1000 in overdraft protection and envelop budget accounts with mortgage and loan payments but that is as liquid as I choose to be. I felt that investing put my money to work for me and I invested as much as possible.

I think by the time I retire, I believe my portfolio will have rebounded. I hope I can look back at this dip as a minor inconvenience.

I am fortunate enough to be able to save money. It is unfortunate that it seems like the people most affected by the market crash are the hard workers who squirrel away a $100 or $200 a week with the hope of saving up enough so they do not have to worry about financial security when they retire.