As I like to say, Max Out of Pocket is located right at the corner of healthcare and personal finance. Kim and her husband dominate the personal finance side of things. So much so that they were able to retire from full-time work at the age of 35. But they also keep an eye on healthcare. From researching short term health insurance plans to how to get a free medical insurance plan off the exchange, they are engaged healthcare consumers. Instead of just complaining about the system, they make a reasonable attempt to understand it and make it work for them. That fits in well with my approach here.

So I invited Kim to share some of her story with a guest post here at Max Out of Pocket. Particularly, how their personal finance strategies helped position them for this pandemic. They were about as financially prepared for this situation as a family can be. I think we can all learn from some of the steps they took in preparing for our next downturn. So with that, today’s post comes all the way from Wyoming.

How to Pandemic-Proof Your Finances

The current global pandemic has thrown us all for a loop. Everyone I know has been impacted in some way by the economic shutdown, and we’re all much more anxious than we were in 2019. However, I’d like to talk to you today about how our family is thriving during the coronavirus, and how we got to this point.

We are a semi-retired family of three living in Wyoming, where we work part-time on fun and flexible engineering projects. For fun, we like to travel the country in our RV and explore the US national parks.

During the recent weeks of social distancing and virtual work/schooling, I’ve had a lot of time to think about how our family is well prepared to handle an economic crisis based on decisions we made over a decade ago. I’d like to share with you some thoughts on gratitude, perspective, and humility, as well as how to pandemic-proof your finances for the next economic event.

Gratitude

Every day I’m grateful for the good fortune our family has experienced along our journey towards financial independence. The choices we made in our early careers have rippled into our thirties and set our family up for success and stability in a time of global turmoil.

Specifically, I’m grateful for:

• My twenty-something self for investing in my company’s 401K plan as well as IRAs each year instead of having larger take-home paychecks.
• My husband for going along with my crazy plan to pay off our mortgage in 2.5 years.
• My college friend for introducing me to Dave Ramsey and encouraging me to “be weird” so I could one day “live like no one else.”

Perspective

A common discussion in the FIRE community centers around the question of “should I pay off my mortgage early or invest?” We took the early mortgage payoff path for peace of mind, even though mathematically it wouldn’t make as much money over the course of our lifetime. What I mean is that we paid off a mortgage loan at 3.75% while our investments were earning 7-10% returns.

This is precisely the reason why some folks carry a mortgage into retirement and beyond – because over the long run, the earnings in the portfolio will outpace the interest on the mortgage loan. However, we have loved ones who brought a mortgage into retirement under these same recommendations from a financial advisor. Then the coronavirus shut down the country, their investment portfolio dropped substantially, and their employment opportunities came to a halt. Meanwhile, that mortgage still needs to be paid each month. A fat lot of good that advice did.

Call me old-fashioned, but I can’t consider myself retired if I still have debt, and that includes a mortgage.

Humility

Although I grew up poor and on government assistance programs like free school lunch and SNAP (food stamps), I have had the good fortune to not need these programs as an adult. However, we’re in a unique circumstance right now where our public schools have closed down for the rest of the school year while the cafeterias are full of food that’s going to spoil. Our school district called all the families in town and encouraged everyone (even families like ours who do not qualify for free school lunch) to come pick up “grab and go” lunches every day so the food doesn’t go to waste. Did you know that food waste is one of the largest contributors towards global warming? Better to be in our bellies than rotting in a landfill. We’ve been enjoying the program so far since it gives us something to do each day, and our daughter thinks it feels like trick-or-treating.

I bring this up because there is so much stigma around the behaviors of poor people vs. wealthy people. Just last month I had a family member tease me for shopping at Aldi because he thought “that’s where poor people shop.” I hate to break it to him, but all the millionaires in our family shop at Aldi. The least wealthy people in our family actually shop at fancy grocery stores like Whole Foods and Fresh Market. Maybe I should send him a copy of “The Millionaire Next Door” for his birthday.

I had a similar discussion over a decade ago when I asked my friend to go to Goodwill with me after work to look for some items for my new house. She asked “don’t you have to be poor to shop there?” I laughed, then explained that there’s no “poor person identification card” that you have to show at the door to shop at a resale store. It’s all about saving money while keeping used things out of the landfill and reducing the environmental impact of manufacturing new clothes & household items!

We’re currently in the sad situation where 1 in 3 of our Wyoming neighbors are out of work, and those who are working from home are coping with pay cuts, while also having to homeschool their kids without any childcare. The lines between the rich and the poor (and their assumed behaviors) are a lot blurrier. It can be humbling to go shop at Goodwill for the first time if you’ve grown up shopping at the mall. It can also be humbling to get your groceries at Walmart instead of Publix because your entire company instituted a 20% pay cut during this economic shutdown.

What I’m trying to say here is that we should not automatically associate certain behaviors with being wealthy or being poor. And honestly, when did it become socially acceptable to shame and judge people for trying to save money?

The Unseen Struggles of the Coronavirus Pandemic

If you turn on the news today, you’ll see a live ticker counting all the deaths associated with COVID-19. However, the unseen struggles are largely uncovered by the mainstream media. Some of the struggles we’re seeing with our extended family, friends, and colleagues include:

• Not being able to buy the things you want at the grocery store. The same family member who teased me at Christmas for buying powdered milk is now freaking out that she can’t buy a gallon of milk at her grocery store.

• Not being comfortable spending long periods of time with small children. It’s easy to get used to the routine of having regular childcare while you work. Now that we all have to spend hours on end with our tiny humans, tempers are flaring and patience is wearing thin.
• Loss of income, including pay cuts and/or layoffs. Most of our extended family is either out of work or had a pay cut, and this includes occupations ranging from healthcare workers to pilots to restaurant managers.
• Lack of motivation. We have three family members in college and it is a struggle to get out of bed and log onto virtual learning when there’s no mandatory attendance in a specific classroom at a specific time of day. One family member is even contemplating dropping out of college, claiming this isn’t what she signed up for.
• Homeschooling various ages of kids. My mom is currently homeschooling a kindergartener and a middle schooler, and she’s figuring it out as she goes (and doing great!).
• Lack of functioning services. We had a family reunion at my mom’s house over Spring Break, and my older sister drove up to visit. Her transmission went out, and she’s been stranded at my mom’s for almost a month waiting for the parts to come in so the repair shop can get her car running again. Thankfully she already works from home and brought her computer with her, but she’s also struggling because she’s now homeschooling her high schooler in addition to working two jobs.

What to Do Before the Next Pandemic

Our family (the three of us) hasn’t been tremendously shaken by this pandemic because we’ve been preparing in the background for years. Some of the things we’ve done include:

• Paying off all debt (including our mortgage, cars, credit cards and student loans) to reduce our monthly required cash flow.
• Working from home and managing our own time. Many of our colleagues are having a hard time adjusting to having complete control of their schedules, to the point where it’s hard to get out of bed in the morning.
• Homeschooling our daughter. Since preschool, we’ve been working with her daily on supplemental homeschool. When public school was reduced from 7 hours a day to less than an hour of “virtual school”, we already knew what to do to fill the rest of the day and keep her brain stimulated. I think we may be the only family in the neighborhood without video games, Netflix or Disney Plus during the school shutdown.
• Embracing frugality. Our first date in college was to the Dollar Tree. My husband and I are lifelong Goodwill shoppers, library junkies, and Walmart aficionados. Since we’re already used to going with the least expensive option by default, lean times aren’t as drastic of an adjustment.

Pandemics don’t happen every day. They don’t even happen every hundred years. However, national emergencies and economic collapses are more frequent. In fact, this is the third one in my own lifetime (9/11, The Great Recession in 2008, and COVID-19). If you’re looking to make some changes to strengthen your position before the world decides to take a pause again, here are some suggestions.

1. Track your finances. You can’t manage what you don’t measure. Once you have an idea of how much you’re spending and how much debt you’re carrying, you can make plans to pay off your debt and make yourself more resilient for the next economic downturn.
2. Get used to a lower cost of living. Try out a more affordable grocery store if you’re not already shopping at Aldi / Walmart. You may be pleasantly surprised at how much money you save for similar products.
3. Take a trip to Goodwill. Even if you don’t buy anything, just going into the store and seeing what is available to buy secondhand can save you money on future purchases. We have a routine of visiting Goodwill at least once a week (when it’s not closed for coronavirus).
4. Track your time. I’m a big fan of Laura Vanderkam’s approach in her book “168 Hours: You Have More Time Than You Think.” Essentially, looking at your time from a weekly perspective instead of a daily perspective brings more balance and helps find more room for things that matter. It can also help ease your mind when you suddenly find yourself working from home while homeschooling your kids.
5. Spend time getting to know your kids and finding ways to enrich them. Our routine is that I take care of the academics – reading, writing, arithmetic, computer skills, Bible study, etc. My husband has fully embraced the “Gym Teacher Dad” role, and teaches our daughter all the sports (skiing, swimming, bowling, hockey, skating, archery and marksmanship). We both teach her our respective household responsibilities like cooking, cleaning, home maintenance, car care, and yard work. The more you know about your kids and their learning styles, the easier it is to fill in the gaps left when school systems are impacted.
6. Get a library card! Then go check out a DVD, install the Overdrive (or Libby) app on your phone for e-Book reading, and attend a free event.

Wrapping It Up

Tough times don’t last, tough people do. By getting your finances in order and preparing yourself for the next emergency, you can reduce stress and strengthen your family for whatever comes next.

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