Isaiah Douglass, MBA, CFP, Founder of ID Financial Planning, Indianapolis, IN
How are student loans affected by recent changes? Which loans qualify for postponed payments?
The news is continuing to evolve and change, but what we know for sure today (March 21, 2020) is the U.S. government has allowed for all direct federal lenders to allow borrowers to suspend their student loan payments without penalty for 60 days. Previous announcements indicated a waiver from new interest accruing would be available, but this new declaration goes a step further. Loans that have been refinanced through an outside institution are ineligible.
If you are laid off or lose your income and are on a Federal Student Loan Repayment Plan, you can recertify your income and have those payments lowered when payments are reinstituted. The development on this will continue to change; reach out to your lender to talk about options. If you did refinance with an outside lender, it’s still worth reaching out to see if they will work with you if you are facing hardship.
Do low interest rates impact me professionally? Personally?
Low rates are likely here to stay.
If you are a practice owner, look at refinancing options for any and all practice debt. There is a surge of applications, and there is a lot of uncertainty, but reach out to lenders who know and work in veterinary medicine to see if they can help.
In addition, when did you last refinance your home mortgage? Even home owners who haven't reached the one-year mark have been able to lower their rates or take years off their mortgage and keep the same payments. Rates have ticked up a little the last week, but there are still plenty of options. Having 20% equity in your home gives an advantage in securing the best rates.
If considering refinancing, remember to think about closing costs. Banks can be aggressive and encourage refinancing with costs under $500, or some banks can come in with costs over $3,000. Run the payback period (ie, when will you see a benefit from refinancing via adding all costs of the refinance and calculating monthly savings), and if you can save money within 12 months, refinancing may be a good decision.
How does the stock market drop impact me in the short term? Long term?
The stock market has moved down—and rapidly. We've seen an unprecedented drop to a bear market (ie, the market average experiences a 20% or greater drop) faster than any time in history. Virus concerns are real, and the stock market responds aggressively to rampant uncertainty.
In the short term, there is no way of knowing whether the stock market will continue to drop or recover. We may not receive much clarity in the coming month or two, so we are likely going to have big moves daily. I do not believe the opportunity to buy into the market will vanish quickly; I'd encourage patience.
If you are worried—which is normal, and you are not alone—try to limit your focus on day-to-day changes, and remember why you are investing. Your investments are likely for the future, and this, too, shall pass. If you have money to invest or want to invest, consider:
In the long term, we have survived all of the worst days in the stock market, and this time is no different. We don’t know when it will recover or how quickly, but it will recover. The market is resilient, but patience is necessary. Patience is going to be key: Do not put any money in the market that you might need in the next 18 months. Research has demonstrated that it's better to be 6 months late investing into a "bear" market vs investing 6 months early. My advice: create a plan, write it down, and execute it. Emotions run high in stressful situations, and you need to have clarity on what you are going to do.
Are we entering a recession? What will that mean for veterinary practices?
There is no clear signal that indicates whether we are entering a recession, but based on economic developments (eg, businesses closing, jobless claims rising), the odds are high that we will enter a recession. Recessions are scary, no doubt, but veterinary medicine fared better than most in the last recession in 2008-2009; it’s worth taking comfort in recognizing the essential services that veterinary practices can offer, even in poor economies.
If you have the ability or are close to launching a telemedicine platform, do it! There is constant comment about how telemedicine is going to be critical in human health during this crisis, the same is true for veterinary medicine. You can truly bond and help your clients and patients in a time like this by embracing technology to help make life easier.
Finally, communicate with your client base about your hours, new processes, and how you can help them and their pets during this time. Payment plans and third-party payment solutions will be essential, given the amount of job loss and cutbacks. Ensure clients understand that you will work with them to ensure the practice does everything in its power to treat and care for them.
For global readers, a calculator to convert laboratory values, dosages, and other measurements to SI units can be found here.
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