FINANCE
supposed to be a year of big growth and
more hiring, Rubin says. But on March
16, the phones stopped ringing as states
began issuing emergency orders, and
the company’s revenue was cut by half
in a week as clients hit pause.
The financial-planning horizon has
shrunk from months to weeks for many
young business owners and professionals.
Even before this Grand Canyon of
a recession, young professional adults
under the age of 40 were up against a
tougher financial future than their older
peers. In 2013, professionals ages 25-34
earned 20 percent less than
the baby boomer generation
did in 1989, according to a 2017
analysis by the advocacy group
Young Invincibles. They have
significantly lower net worth
than Generation X households
did at similar ages, according
to a December 2019 report by
the U.S. Government Accountability
Office. Almost 80 percent
— more than in the previous
generations — think they’ll have
to work past normal retirement
age, a March 2019 survey by the
nonprofit National Institute on
Retirement Security found.
Still, none of that means
the rules for putting together
a long-term personal financial
plan have changed. For some,
this pause offers a chance to
revisit or create a strategy that accounts
for future downturns and puts steps in
place to meet their money goals. Here’s
what financial planning experts in the
Capital Region say young adults can
think about to stay alive financially
through 2020 and beyond.
Survive the crisis
There’s nothing wrong with short-term
thinking during a threat, say advisers:
It helps you live another day. At The
Colour Bar, the Martinezes are keeping
as much cash as possible, in part by
putting off paying bills for 2-3 months.
Grant Bledsoe, a certified financial
planner at Three Oaks Capital Management
in Sacramento, says the priority
now is to keep an owner’s main income
source — the business — viable. “As
much as we want to fund the 401(k) or
put $6,000 a year into the Roth (individual
retirement account) … I’m telling
people, ‘Hey, it’s all right,’” he says.
“What’s more important is that you still
have a job to go back to and can continue
pulling money out of your business
to support your life.”
The Coronavirus Aid, Relief, and
Economic Security Act passed by
Congress in late March offers an out
for those who want to sacrifice their
“As much as we want to fund
the 401(k) or put $6,000 a
year into the Roth IRA … I’m
telling people, ‘Hey, it’s all
right.’ What’s most important
is that you still have a job to
go back to and can continue
pulling money out of your
business to support your life.”
GRANT BLEDSOE
CERTIFIED FINANCIAL PLANNER,
THREE OAKS CAPITAL MANAGEMENT
retirement funds to stay afloat. Individuals
can withdraw up to $100,000 from
many tax-advantaged retirement plans
or IRAs without the early withdrawal
penalty or 20-percent tax withholding.
Still, Suzy Taherian, a lecturer at UC
Davis Graduate School of Management,
strongly advises against that if there’s
another option because doing so locks
in the recent market losses. A better
option, she says, is to take a loan against
your 401(k) if you have one. The coronavirus
relief bill doubled the maximum
amount for loans of this type. And
Taherian points out that with interest
rates so low, that money is cheap now.
That also should go for attitudes toward
debt generally, according to Kevin
Thelen, a certified financial analyst at
Prospero Wealth Advisors in Roseville.
Debt serves people positively when it’s
part of a plan that works for them and
negatively when it’s not. “There’s nothing
wrong with 25-percent credit card
debt if in fact your circumstances call
for that,” he says.
Plan for postcrisis
The coronavirus pandemic illustrates
why planners emphasize cash reserves.
Keeping enough cash on hand has been
a priority for Rachel Smith, 34, the owner
of public relations consulting
firm WordSmith Communications.
She launched in 2017, has
had steady work and hasn’t lost
clients. But she’s always operated
as if they could disappear
overnight. So she’s always tried to
keep a six-month reserve, cutting
expenses to make that happen.
That’s in line with the
3-6 months financial planners
recommend. For Bledsoe, it
could go as high as 24 months,
depending on the situation —
number of incomes in the household,
age, tolerance for risk,
number of children at home and
so forth. Cash in a crunch also
offers opportunity, says Charles
Ho, a certified financial planner
and the founder of Legacy
Builders Financial in Folsom. In
times like the present, people with excess
cash can buy distressed assets at a
steep discount. “Obviously, that sounds
greedy … but that’s the nature of living
in a capitalist society,” he says.
Once we’re through this crisis, set
a goal for how much to save, say area
planners, who agreed that a range of
10-15 percent of income is a good number
to shoot for. Amber Rosen and her
husband, Mark Rosen, are way ahead of
that: They set aside 20-30 percent, putting
profits from Breakroom Fitness back
into the business, setting money aside
for their daughters’ college funds from
Mark’s pharmaceutical sales job and investing
in real estate. They take modest
vacations, and Amber drives her car un-
58 comstocksmag.com | July 2020