How will the coronavirus affect your personal finances?

How will the coronavirus affect your personal finances?

How quickly things change.

Last week, the coronavirus (or Covid-19, if you prefer) was a distant problem. It was something other people in other places had to wrestle with. Sure, there was a looming sense that maybe this runaway train was steaming our way, but it still seemed distant enough that maybe it'd stop before it reached us.

Not anymore. Now it's clear that the coronavirus isn't just headed to the U.S., it's already here in our communities.

I'm fascinated by the financial implications of the coronavirus. They're going to be huge — they're already huge — but I don't know who is going to bear the burden or how we, as a society, are going to make sense of this in the long run.

The stock market is tanking, obviously, and will likely continue to tank for some time. But I expect (hope?) that when the dust has settled, things there will largely return to normal.

Yes, I know it's impossible to make predictions about the market's direction. But I believe the current movement is largely due to the coronavirus and its immediate implications. When this event has receded into the past — in a few months, say — I expect stocks to regain most of what they lost. Not all, but most. (And again: I could be full of shit. Don't make any market moves based on what I personally believe will happen. I'm just a random guy behind a keyboard.)

But outside the stock market, there are a whole host of financial implications. We're entering uncharted territory. I don't know what to expect, and I don't think anyone else does either.

Here are some of my questions.

What Happens When Events Are Cancelled?

Many places — including here in Oregon — are banning large gatherings.

What happens to gatherings that have already been scheduled? I expect some events (such as the Portland Timbers match on March 28th) will be postponed. This should have a minimal financial impact on all parties. It simply shifts all of the money-related stuff to a later date.

This has been one of the toughest articles I've ever written. As I'm sitting at my desk composing it, new updates to the situation are occurring. Just now, for instance, Major League Soccer announced that it's suspending the season for thirty days. Rather than re-write as news hits, I'm going to leave the article as it was in the moment I wrote it.

Other events, though, will have to be cancelled. What happens then?

For instance, Kim and I have tickets to see an April performance of The Illusionists at Portland's Keller Auditorium. This event falls inside the 28-day ban on large gatherings in this state. I highly doubt this event well be re-scheduled. I expect it to be cancelled.

So, what happens when this event is cancelled?

Under normal circumstances — if the event were cancelled for any other reason — I'd expect to receive a refund for the ticket price. But what about now? Will ticket holders still receive refunds? Or will the production company say, “Sorry. This is beyond our control. You're out of luck.” I can see that happening. And I'm not sure I'd complain.

What about St. Patrick's Day? I consider this kind of a silly holiday, but it's a Big Deal to a lot of people.

Perhaps because it occurs in early spring, St. Patrick's Day fosters events with large crowds. Here in Portland, that means the Shamrock Run, in which 30,000+ people gather in the cold and the rain to run through downtown. That's been postponed. And Savannah, Georgia, home to the second-largest St. Patrick's Day parade in the country, just cancelled the event.

When I posted about this on Facebook, one of my friends noted that formal disaster declarations allow insurance claims to be filed. This sounds great, in theory. Disaster declared, so both the production company (or event producer) and potential attendees all get their costs refunded. Yay!

Or is it “yay”?

Doesn't this simply shift the financial burden to another party? If, as appears increasingly likely, we experience large-scale cancellations, won't this effectively gut the insurance industry? Do they have enough financial reserves to cover something of this magnitude? I find that unlikely. So, what happens then?

Here's another real-life dilemma.

The first-ever Financial Freedom Summit is scheduled for May 1st in St. Louis, Missouri. I'm supposed to speak. I haven't booked my flight yet, and at this point I don't know whether I should. While St. Louis hasn't been hit as hard as the West Coast, it's beginning to feel the effects, and events are being postponed or cancelled.

Will the city (or state) eventually issue a ban on large gatherings? How long will this ban last? I believe we're at the front-end of the coronavirus vector curve here in the U.S., but how long will it be a concern? Will we still be talking about this in late April and early May? Or will we be done with it in a couple of weeks?

If I had to guess, I'd say things are going to peak by the end of March, and that by the end of April, we'll mostly be back to normal. But what do I know? Again, I'm just a random guy behind a keyboard.

If I did book my flight and the event were cancelled, would I be able to get my money back? Airlines seem to be making some accommodations, but for how long? For now, I'm holding off on any decisions. (Worth noting: Not everyone has been able to get ticket refunds from airlines. Some are simply out of luck.)

Over at I Will Teach You to Be Rich this morning, Ramit Sethi published an excellent piece on the coronavirus: Panic is bad, but overreaction is good.

What's Going to Happen to Small Business?

In reality, I'm less concerned about how Big Business is going to weather this storm and more worried about how small businesses are going to hold things together.

Take restaurants, for instance. It's been a couple of weeks since I dined out — hey, I'm following through with my resolution to spend less on food in 2020! — but I can only imagine that things are slow slow slow. (In hard-hit Seattle, layoffs have already begun.)

To check my hunch, I messaged my friend Kyra Bussanich. Kyra's the only four-time winner of Cupcake Wars and owns a local gluten-free bake shop. “Have sales slowed at all?” I asked.

“Oh gosh yes,” Kyra answered. “And if things continue, I don't know if there'll be a bake shop when this blows over.”

Things are so bad, in fact, that she's taken a part-time job to make ends meet — and is even considering applying for a full-time job. All this while trying to run her business, a business that's struggling because of the coronavirus.

At the end of our conversation, Kyra gave me some words of advice for how to help. “If there are artists or small businesses you love,” she said, “I urge you to go buy gift cards to them and when this all blows over, redeem those gift cards.”

GRS reader Christine runs a small business that gives food tours in Nashville. She says that new bookings have stalled. Plus, folks are cancelling travel plans, which means she's refunding tour tickets. “I had a plan for a recession,” she says. “This is like somebody turned the faucet off.”

So, as bad as things seem for big companies like Apple and United Airlines, they're even worse for small businesses.

I should note that not all small businesses are being affected. As you know, my family owns a small firm that manufactures corrugated packaging. Custom Box Service is humming right along. In fact, things are busy right now, which is a good sign.

How Will the Coronavirus Affect Personal Finances?

As a personal finance writer, though, my biggest concern during this crisis is the impact it's going to have on individuals.

I know I just updated my article about what to do when the stock market crashes on Monday — and I stand by my advice there — but there's more to personal finance than stock-market investing, right?

How is all of this going to affect workers? If Kyra's Bake Shop has to shut down — even temporarily — she loses income as an entrepreneur, but suddenly her employees are out of work. If my girlfriend's dental office decides it can't (or won't) see patients, she'll have to go without an income for a while.

Fortunately, Kim has savings. So do I. We can weather the storm. Not everybody can. In fact, most Americans have little (if anything) saved.

If you're thirty-something with a family, a mortgage, a car payment, and credit card debt, then what happens when you lose your job (or experience a layoff) because people stop coming to where you work?

In a normal economy, this happens constantly on a very small scale. People no longer use typewriters, so a typewriter firm goes out of business and its employees no longer have jobs. But that's a tiny handful of businesses. Now, today, this is problem is wide-spread and happening all at once.

This isn't me making stuff up. This is happening to our family and friends right now in the real world.

Coronavirus reality

What happens when many people experience this at the same time? What then?

The Independent, a British publication, recently opined that the coronavirus will bankrupt more people than it kills. I suspect this is true. From the article: “We may look back on coronavirus as the moment when the threads that hold the global economy together came unstuck.” I hope not.

The financial effects won't simply come from lost wages. Many folks who succumb to the coronavirus in the U.S. — and I truly hope this will number in the tens of thousands, not the hundreds of thousands — could face high medical bills.

For 81% percent of people who contract it, the coronavirus is mild, which means it feels like the flu. For 14% of people, however, it's severe enough to require hospitalization. Another 5% of those infected suffer symptoms so severe that they need intensive career. (Generally speaking, they need artificial respiration.) And roughly 3% of people die from infection.

While I keep GRS largely politics-free, health care is one rare exception. Our current system is ridiculous: expensive and outmoded. This coronavirus may finally serve as a catalyst for change. Maybe.

What Happens in the Long Run?

I have other questions about what will happen in the long run.

Can the national (and global) economy simply take a two- or three-month break, then resume as normal as if nothing happened? What happens in the meantime? How do we care for our at-risk populations and for those who already struggle to make ends meet?

How do we improve our ability to handle black swan events like this in the future?

Will this crisis change anything about how we live and relate to each other? Is it possible that this could perhaps alleviate some of the partisan bickering we've been experiencing in recent years?

It's my deepest hope that this unprecedented event will draw people together in a way that we haven't seen in this country for some time. I hope that the spirit of cooperation blossoms and that people and and government and business find solutions to make sure everyone comes happy and healthy and financially secure.

Unfortunately, I don't think that's likely to happen.

I don't have any answers here, obviously. All I have is a lot of questions. I suspect that's true for everyone. For once, this really does seem like a case of “this time is different”.

Lifehacker has published a guide on what to do if the coronavirurs is affecting your finances.

More about...Economics

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El Nerdo
El Nerdo
7 months ago

While I keep GRS largely politics-free, health care is one rare exception. Everything is political J.D…. Ok, this is your blog, so you can cherrypick issues, but… reality is different. xD I’m lucky to be a member of a union household with a solid paycheck and good health benefits, so I don’t think we’ll be very much affected in the short term. The politics of collective bargaining got us covered. Which is great. Of course for many people it would be great to have health care decoupled from employment, wouldn’t it? I’m not going to be one of the “screw… Read more »

Adam
Adam
7 months ago

I’ve been telecommuting full-time in veterinary software for the last four years, but my degree is in music performance. I’m in a number of amateur musical groups. Every one has cancelled upcoming concerts for at least the next month. My friends who freelance for a living are stuck giving lessons via Skype and hoping they get calls later from their normal performing venues… assuming those venues don’t go under. After work today I’m walking down to the farmers market to do my part toward keeping the baker in business. Our small local distillery opened 15 months ago and just last… Read more »

Frogdancer Jones
Frogdancer Jones
7 months ago

For those worried about Tom Hanks – he and his wife are in Australia. World-class FREE medical care. He and his wife will be just fine.

Jordan
Jordan
7 months ago

Agree its very good, but there is a 2% levy in your income tax statement for it

stellamarina
stellamarina
7 months ago
Reply to  Jordan

But Aussies do not have to pay for medical insurance……so it all evens out. I doubt that free medical is offered to Mr and Mrs Hanks…..not residents of the country.

Jim
Jim
7 months ago

You are wrong. Nothing transcends politics. Evidence: All you talked about in the article is death and politics. Don’t worry i will be unsubscribing.

biggrey
biggrey
7 months ago
Reply to  Jim

Good riddance

dh
dh
7 months ago

My mom and dad, who are in their 80s, said they have never seen anything like this in their lifetime — not in regards to this virus — but the REACTION to it. My mom mentioned how AIDS seemed like such a bigger deal when it was first breaking, yet things went on. I guess technology has made everything so different, so immediate — our phones keep scaring us about this every few minutes; I even got a text today from my credit card company regarding the virus. But technology aside, why is the media treating this so differently from… Read more »

Louise
Louise
7 months ago

Super small world feeling for me to see a friend’s FB post about closing her show on your blog! I’m in the middle of a job transition right now, leaving a theatre company I have produced with for a decade and joining the staff of the theatre where She Loves Me was being produced. Now I don’t know if I have either job. “When I posted about this on Facebook, one of my friends noted that formal disaster declarations allow insurance claims to be filed. This sounds great, in theory. Disaster declared, so both the production company (or event producer)… Read more »

Lisa
Lisa
7 months ago

So usually I think going out to restaurants is a bad idea, it’s incredibly expensive. And not great for your health. It’s called a “hobby” in my expense categories to remind me of that. BUT, I love doing it and this is a great excuse to go out and eat at local restaurants!

Kate
Kate
7 months ago

Great idea to support local businesses during this time, but I’m not a big fan of gift cards in this situation, as if worse came to worse and the business went under, it would likely become worthless. We usually just stick to getting gift cards at Costco (for ~ 20% off) for chain places we plan to visit in the near future.

Steven Danner
Steven Danner
7 months ago

JD, I’m from St. Louis, and I can tell you, if that summit was to happen today, it would be cancelled. You’re correct that we’re not hit as hard as the west coast, but new cases seem to be cropping up every day. St. Patrick’s day is a big deal around here and they’ve shuttered almost every aspect of it. I’m sure you’ll figure it out when the time comes, but for the record, the reaction here seems to be about as large as anywhere else.

Keith
Keith
7 months ago

Not so sure about the 3% fatality rate…
https://www.medrxiv.org/content/10.1101/2020.03.05.20031773v2

Sue
Sue
7 months ago

The New Hampshire insurance commissioner has ordered all insurance companies to cover COVID-19 testing and initial doctors’ visits in the Granite State. There will be no co-pays or deductibles for those services according to insurance commissioner Chris Nicolopoulos. The state’s goal is to break down financial barriers to coronavirus testing. “We wanted to ensure that people weren’t making a financial choice about determining whether or not they should be tested for COVID-19,” Nicolopoulos said. The Department of Health and Human Services said testing costs will also be covered for Medicaid recipients. https://www.wmur.com/article/nh-insurance-commissioner-directs-insurance-companies-to-cover-covid-19-testing/31462141# I also received a similar notice from my… Read more »

Vicki
Vicki
7 months ago

wonderful and compassionate musings and projections of possibilities.

Carmine Red
Carmine Red
7 months ago

Re: Cancelled trip bookings, I recently ran into the exact same hair-pulling rage-inducing problems of facing down very un-helpful people. It’s their jobs, of course, but I’m pretty much resolved to as much as possible never book through travel agencies and online booking websites again, they are 100% not on my side when the chips are down. BUT, now I’ve become very enamored of “Cancel For Any Reason” (CFAR) travel insurance, which is BEYOND just regular travel insurance. For a little more of a fee I’m hoping this route helps me recoup some (the one I got only covers 50%… Read more »

Dan
Dan
7 months ago
Reply to  Carmine Red

Carmine, I do a lot of foreign travel (and in fact, have something planned at the end of May), and by and large, travel agencies and online booking websites are just middle men that provide little value-add but the potential for major headaches. There are exceptions, most notably with specialist travel agents. I learned my lesson years ago with Orbitz, when I needed to change a ticket, and had to pay both the airline change fee AND an Orbitz change fee. WTF for? What value-add did Orbitz provide such that a fee was justified? So I voted with my wallet,… Read more »

Kristin
Kristin
7 months ago

I’m a librarian in Seattle and all of our libraries have closed until at least April 13. (Schools of course, until through April 24 at least). Listening to the Department of Health press conferences, we’ve been told “there is no magic bullet. Expect this not to peak for 1-2 months and maybe subside in 3-4”. In the places it hasn’t hit yet, I’m certain we will still be talking about this in early May, though I desperately hope we won’t be. The Seattle Times is reporting that for some events, arts organizations (like Seattle Theatre Group) are asking ticket holders… Read more »

Reverse The Crush
Reverse The Crush
7 months ago

This Covid situation certainly does raise a lot of questions. It’s crazy to see something just halt our world like this. I am interested to see how it impacts healthcare and work long term. That point about how the virus will bankrupt a lot of people is scary. Hopefully we can all come together, find a solution and get back to normal soon.

Clint Sharp
Clint Sharp
7 months ago

JD in Melbourne Australia the Grand Prix got cancelled day 2 into the event, a woman that runs a fast food van was on the radio crying that she had food. Sandwiches and rolls for thousands with no where to sell them. She had just started the business and this will brake her. When there is a big picture we sometimes miss the small things going on in the background. Clint.

amy
amy
7 months ago

I’m enjoying the compassionate, human centered aspect of the financial impacts of this virus. Thank you for posting this article. I’m with someone who works audio for conventions, and company’s conferences. Business basically dried up in the course of this week for him and while a few gigs are delaying, most are just canceled. There is no work on the horizon, and there was no warning that this was coming. He’s in a better place than some of his colleagues, but it’s stressful because emergency funds will run out after a time. He’s working other plans, but it’s a lot… Read more »

Meghan
Meghan
7 months ago

I’m in the Denver area, in a spot with community spread, and unless you sell groceries, you had no traffic today. I stopped in to Chipotle for take out on my way home and even it was dead. This place would typically have a line outside the door on a Saturday at lunchtime. I don’t think small businesses will make it and I think restrictions become more Italy-like before they are lifted and we return to any normalcy. The biggest issue as I see it is that you can’t get tested so our numbers are vastly understated. We have no… Read more »

S.G.
S.G.
7 months ago

WRT healthcare, I haven’t heard of anyone being denied care for any reason. If anything the places with socialized care seem to be getting hit just as hard, if not worse. I don’t believe Italy is a model of healthcare capitalism, nor is China. All of the issues I have heard in the US system are bureaucratic in nature, something that nationalized healthcare doesn’t exactly fix.

I don’t think this situation makes socialized care look any better.

Janette
Janette
7 months ago

Great article.
Now is time for an article about getting to basics.
Budget: Basic foods/basic toiletry
Rent/ mortgage (even if you just can give a bit to show good faith)
Transportation become your bike
What else?
We are looking at 6-10 weeks (according to my friend in Hong Kong- 10).
Let’s get positive and creative!
I do not care who did what to whom. Pull it together and move forward (at a proper social distance.)

Joe
Joe
7 months ago

It’s going to get worse before it improves. All of us need to do our part to flatten the curve. Don’t be in denial and go on as usual. That’s what happened in Italy. Yes, support your local businesses, but avoid large crowds even if you don’t mind getting sick.
I’ll drop by Kyra to pick up a few things. Good luck everyone!

El Nerdo
El Nerdo
7 months ago
Reply to  Joe

Yep, my wife and I are already self-quarantined. We’re not worried about ourselves but about spreading it to others, especially seniors. Best wishes to everyone!

Kristen
Kristen
6 months ago

I think you have some good points in your article. What I wished it touched on was the many, many people who work in the live event industry, myself included for context, are now suddenly out of work with no work in the foreseeable future. Examples of these workers are caterers, lighting, sound, video, and stage technicians, and camera people. Our work is done in person and on-site, so we can’t work at home. Many people make their livelihoods working part time (W-2) for a dozen or two dozen companies and/or are self-employed as contractors (1099-MISC) for gigs/events/runs of shows.… Read more »

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