VCU webinar helps faculty and staff with personal finance during COVID-19 pandemic
In April, the VCU Office of the Provost introduced a series of “Survive and Thrive” webinars intended to provide VCU faculty and staff with free advice on “common COVID-19 concerns.” On April 30, VCU School of Business Dean Ed Grier moderated a virtual panel discussing “Personal finances in the COVID-19 pandemic and beyond.” Panelists included:
- Jeff Lacker, Ph.D., Distinguished Professor of Economics
- David Downs, Ph.D., Alfred L. Blake Chair, Professor of Real Estate
- Carolyn McCrea, M.Ed, Director, Virginia Credit Union Financial Success Center at VCU
Jeff Lacker’s historic perspectives on the downturn
Jeff Lacker, former president of the Federal Reserve Bank of Richmond, has followed economic conditions, including upturns and downturns, for more than 40 years. He stated that:
- The COVID-19 economic downturn is sudden, swift, deep and different from any other.
- The impact has been uneven on the workforce (less hard on skilled workers) and uneven across industries (hard on airlines, hotels and restaurants while favorable to grocery stores and online retailers, such as Amazon).
- Uncertainty persists. While hospital resources have not exceeded capacity, there exists no nationwide plan for testing and contact tracing and the most promising vaccine is at least nine months away. We could relax the suppression only to have flare-ups occur.
- Anticipate a healthy economy coming back within one to three years, but understand that persistent changes in economic behavior may last some time. For example, people may remain averse to public spaces (restaurants, theaters, sporting events, travel) or shift to behaviors such as increased online shopping.
- With people drawing down on savings, anticipate a persistent reduction in spending, even after the economy recovers from the pandemic, as people rebuild their savings.
- Once the virus is behind us, the configuration of our former economic activities will remain viable. This recession was not the result of a persistent problem in one sector.
- Consumers need to prepare for a range of possibilities. Expect that the outlook and economic conditions could change rapidly and be alert for chances to change your plans.
- Broadly speaking, there is hope that we can get through and out of this contraction more rapidly than we typically do because we got into it more rapidly.
Advice for seeking forbearance with housing payments
David Downs is an expert on real estate investment, institutional real estate and commercial real estate investment vehicles. He encouraged those who have lost income and are trying to cope with rent or mortgage payments to exercise compassion and gain understanding before taking action. His recommendations included:
- Exercise compassion with yourself. If you have lost your job, understand that you’ve done nothing wrong. Now is not the time, for example, to question why you took on mortgage debt. Instead, take time to understand your situation and take positive action.
- Extend compassion to others. Understand that problems related to housing are often not the fault of the rental officer manager or mortgage servicer. Showing compassion to these “middle people” can help you get what you want.
- Negotiation plays a big role in the game of real estate, so take time to understand the goals and incentives of the person on the other side of the table. For example, a rental office employee wants you to pay your rent because they may be concerned for their own job. A landlord may have their own bills or debts to pay, yet they also are motivated to keep you in place rather than risk losing a tenant during an uncertain time.
- When negotiating mortgage payments or seeking forbearance, understand that your original lender most likely does not own your mortgage. Third parties, mortgage servicers, often collect mortgage payments to be distributed among multiple owners. Mortgage servicers are woefully understaffed for dealing with individual borrowers, resulting in extraordinarily long wait times.
- Financial problems will not go away by being ignored. Be proactive about financial challenges. Making the first move could buy you some goodwill with your lender or landlord.
- If seeking forbearance, be prepared to provide documentation related to your employment or financial situation, be persistent despite long wait times and be sure to document your efforts (date, time, who you spoke with).
Downs concluded his remarks by sharing a touching and timely quote from Desiderata, a poem by Max Ehrmann that dates to the 1920s: “[D]o not distress yourself with dark imaginings. Many fears are born of fatigue and loneliness.”
Resources available from Virginia Credit Union Financial Success Center at VCU
Carolyn McCrea, an accredited financial counselor, began her VCU career as assistant director at the VCU School of Business Foundation and is now director of The Virginia Credit Union Financial Success Center at the School of Business. McCrea recommended:
- Despite economic uncertainty, look for creative opportunities to create savings. For example, a family taking advantage of social isolation to potty train their toddler might consider investing their diaper expenses in a college savings plan.
- 529 college savings plans are tax advantaged and wise investments for those with children. During the 2008-09 recession, 529 plans lost less than 401k plans and other investments because they are well diversified and have a target date (maturing when a child turns 18).
- Though student loans may not have a good reputation in the news media, they could be a good choice for individuals who have college-age children but have experienced furloughs, layoffs or loss of income. Federal loans have flexible repayment options, fixed interest rates and offer forbearance.
- If your household income situation has changed drastically, be sure your child’s college or university has the most up-to-date information by resubmitting your FASFA forms online. If your updates do not change your award letter, work with the school’s financial aid office to make an appeal. Your student could qualify for Pell grants and other loans that may be created or expanded as a result of this recession.
- If considering retirement, a good “nest egg” retirement target is to have saved 33 times your annual spending. Alternately, aim to have an annual income or disbursement that is 70 percent of the salary you received your last year of working.