I’m not the sort of person to panic about the sky falling, but I will admit that I’m not sure what to make of the Coronavirus situation we’re all dealing with right now. Markets are down, airlines that reported the highest profits in history at the start of the year are now worried about furloughs and bankruptcies, and governments all over the world are imposing quarantines in ways that I never thought I’d live to see.
Although this situation sucks in most ways, I’m not especially worried. It’s going to continue causing us pain for a while, but I firmly believe that we have more good times ahead of us than bad. The following are some big-picture thoughts on our situation, followed by some advice on how you can make the best of a terrible situation.
Before we go there, I need to start with a disclaimer: I’m not a professional financial advisor. My comments here will address some general investment strategies, but I’m obligated to recommend you consult a professional before you try to implement any of them. If you want some background on why I make these particular suggestions, I recommend you read the entirety of my book, Pilot Math Treasure Bath. (This is an Amazon affiliate link that gives a kick-back to BogiDope.)
Table of Contents
- Big-Picture Coronavirus Thoughts
- Right Now – Coronavirus
- Right Now – Your Job
- Right Now – Your Cash
- Right Now – Your Investments
- Long Term – Jobs
- Long Term – Investments
- Wrap Up
Big-Picture Coronavirus Thoughts
This situation would be a lot easier if the COVID-19 symptoms were more shocking. Most people with Coronavirus will get a dry cough, some aches, and a temperature. That can’t be as bad as “unexplained hemorrhaging, bleeding or bruising” like with Ebola, right? The problems here are twofold:
First, although younger, healthy people aren’t likely to get that sick from this virus, it’s a killer among old and immunocompromised people.
Second, the long incubation period of the disease, coupled with the likelihood of mild symptoms, means that you could spend several days spreading it before you even have a clue you’re sick.
The average BogiDope reader will probably be fine. However, my parents are in their 60s and my wife’s dad is 74. If you cough on one of them, it could be a death sentence. The same might apply to your spouse, child, parent, or friend. I know it’s tough for us pilots to understand, but all this social distancing and these quarantines aren’t really about you. They’re about protecting everyone else from you – especially everyone else who has no defense if you expose them.
One of the phrases that is used in conjunction with pleas to stay at home and away from everyone else is a desire to “flatten the curve.” At least one site cites Dr. Drew Harris as coming up with the basic graphic that gets passed around.
The idea here is that if a bunch of vulnerable people like my Mom and your son all get sick at once, there won’t be enough hospital beds and ventilators to give them the care and even basic life support they need. At some point, if we run out of ventilators, the next patient to walk into the hospital will be told to go home and roll the dice. I hope that isn’t your Grandma.
The idea of flattening the curve means that fewer people get sick at the same time so that our country’s medical resources don’t get overwhelmed. We make this happen by isolating ourselves, and not going out unless we have to.
However, we should also realize that this doesn’t reduce your risk of getting sick. In fact, if you calculate the integral of these two curves over time, you’ll find that roughly the same number of people get sick over the course of the next year…or perhaps that the flat curve means even more people will get sick. The goal here isn’t to prevent sickness…we have no way to do that. The whole point is to keep from running out of ventilators because no doctor wants to send your asthmatic wife home to die.
With that in mind, please take the guidance from scientists and doctors at places like the CDC seriously. Your life may not depend on it, but I guarantee that the life of someone you love does.
Although we need to do what we can from a public health perspective, we can’t ignore the fact that COVID-19 is wreaking havoc on our economy. The US Government is having a hell of a time trying to balance the need to protect public health with a desire to keep the economy from crashing.
As bad as Coronavirus may be, it likely will not last forever. We’re seeing fewer new cases in the most affected areas like China and Italy. The US is only a week or two behind Italy on the timeline and could start showing improvements soon. I have faith that a combination of ingenuity, desire to do good, and greed will end up with at least one pharmaceutical giant coming up with some type of effective treatment for this disease.
In many ways, it seems unwise to cause economic catastrophe from which it will take years to recover when it’s likely that COVID will have gone the way of past pandemics like SARS and Swine Flu by the end of the year.
Travel-related companies like air and cruise lines have been some of the hardest hit as fear and government orders have cut travel to almost nothing. It seems strange that airlines who reported some of the biggest profits in industry history a few months ago are now worried about their very survival. (Much of the blame here lies with corporate executives prioritizing shareholder appeasement over the long-term health of their companies. For an outstanding discussion on that topic, check out this article.)
The US Government is trying to put together a stimulus package that will prop up some of the worst-hit industries. However, politicians on both sides of the aisle have thus far failed to agree on what to do…turning a national crisis into an opportunity for political theater. Here’s to hoping they’ll agree to something productive. (Just don’t get too excited about the Billions of dollars they promise to “give” you. The US Government is so far in debt that every dollar in this stimulus bill will be make-believe anyway.)
So, to sum up so far:
- Coronavirus is a serious problem. It’s not about you…it’s about your loved ones.
- Scientific solutions will save lives, at the cost of extending the duration of the virus’ impact.
- It’s tough to balance the public health side of this with the economic impact side.
- The Government, like the FAA, is here to help.
This doesn’t mean you’re screwed. There are a lot of things you can (and maybe need) to do to make sure you and your family weather this storm as well as possible. Let’s take a look at a few.
Right Now – Coronavirus
Even if you’re healthy enough to survive exposure, you don’t want to get COVID-19. At best, it’ll be a miserable couple weeks. At worst, you could infect a loved-one whose body can’t defend itself. You don’t want that guilt.
The solutions here are simple: Stay at home. Wash your hands. Don’t venture out unless you have to. Will you get bored? Maybe…if you lack imagination. The miracle of the internet has placed almost all of the books, music, TV shows, and movies that humanity has ever produced right at your fingertips. Sure, you’ll have to pay to get access to much of it. If you can’t think of anything else to do, subscribe to one streaming service at a time. Exhaust your options there and then move on to the next one. I guarantee that the COVID-19 crisis will be over before you get all the way through Netflix, Hulu, Amazon Prime Video, Disney+, YouTube TV, HBO, CBS All Access, and whatever else is out there.
Don’t forget to eat right and work out…especially if you really do plan to watch that much TV. Even the strictest quarantines in Italy allow people to go to the grocery store. Be careful when you go, but get enough fruits, veggies, and real foods to get good nutrition. If you haven’t already, read The Obesity Code and How Not to Die. They’ll explain exactly what to buy and why.
You can do plenty of valuable working out at home. No, you don’t need a gym. Worst-case, YouTube is replete with free workout videos. So far, many quarantines have allowed you to run outside, at least in the suburbs. You’re highly unlikely to come into contact with any fluids containing COVID-19 if you’re running outside with nothing other than the soles of your shoes touching anything.
If you’re expected to go to work while Coronavirus is still a major threat, take precautions. Keep your distance from others, wash your hands frequently, don’t touch your face, etc. Do what you can and don’t sweat the rest. Speaking of jobs, let’s talk about yours.
Right Now – Your Job
If you’re already senior enough at a major airline to be “furlough proof,” you should be pretty happy right now. Now it’s time to think about what you can do to help your brothers and sisters who aren’t as lucky!
If you’re still on Active Duty in the US Military, now is not the best time to leave. Most airlines, major and regional have stopped hiring. Both TSA and Compass have announced that they’re closing up shop altogether. Whereas our industry was rife with opportunities for military pilots transitioning to the airlines just a couple weeks ago, even the most highly-qualified military pilot will be hard-pressed to get an airline job for the next few months.
If I were you I’d stay on Active Duty for now…but don’t get comfortable! Before COVID-19, the airlines were all desperate for people. As of a few weeks ago, the airlines were woefully short of the 1,900-ish pilots they needed to hire this year, just to cover mandatory retirements. (And the airlines have been exceeding the mandatory retirement numbers by 15-25% every year.)
Travel restrictions have made it impossible for these airlines to interview new pilots, and even train the ones to whom they’ve extended Conditional Job Offers (CJOs). There will probably be some contraction of the airline industry as a result of this downturn, but make no mistake: our world is addicted to air travel. When this industry starts picking up pace again, it will move quickly!
If your goal is to ever leave the military and get an airline job, you must ensure you’re ready and competitive when the next hiring rush happens. First and foremost: this means don’t take a retention bonus, or an assignment with a long Active Duty Service Commitment (ADSC) unless you’re willing to give up a couple of thousand seniority numbers for the rest of your life. It also means, don’t just go fly the line under the blithe assumption that you don’t need to improve yourself. Continue to pursue advanced qualifications! Continue to develop yourself as an officer/leader. Take advantage of this time to have some more people (including some pros) put their eyes on your applications and resume!
Doing all these things will make you more competitive for an airline job when that market opens back up. However, it’ll also make you more attractive to a Guard or Reserve unit, which brings me to my next point….
If you’re a Guard or Reserve pilot, you’re probably pretty happy right now…especially if you also have an airline job. In times of crisis like this, most units are very good at finding orders to keep their people working and getting paid. I have flown with hundreds of airline captains and to a man (I have yet to fly with a female captain) they all advised staying in the Guard or Reserve as a backup for when (not if) something like COVID-19 (or 9/11, or bankruptcy, etc) happens.
We’re seeing this right now. If you’re in the Guard or Reserve and can pick up some longer-term orders, you’ll be helping your non-military airline pilot buddies by freeing up trips for them to fly to earn money. If your company is on shaky financial ground and considering furloughs, your ability to take some long-term orders could keep your friend’s family from wondering how it’s going to survive. You’d be serving your country in more way than one.
With the pilots of our country suddenly remembering what a good deal the Guard and Reserve can be, those units aren’t going to need to hire as many people in the near future. If you’ve been considering a move to the Air Reserve Component (ARC), but haven’t made it yet, you’re now facing an extremely competitive job market! Forgive us for suggesting that you may want to consider using the consulting services of a company that has helped hundreds of military pilots land the Guard or Reserve job of their dreams.
Although I feel that you’re better off finding a way to make things work in the short-term so that you can move to the airlines quickly, if you need job security right now you may want to consider pursuing a job as an Air Reserve Technician (ART). These jobs aren’t eligible for military leave under USERRA, but they’re stable and they pay very well. If you need to free yourself from the insanity of Active Duty, but can’t wait for the airline industry to turn around, an ART job may be just what you need.
For the young pilots out there who are still in training, I would keep going if I were in your shoes. I don’t think the downturn will last longer than it will take for you to finish UPT and accrue enough hours for an R-ATP, or get the 1,500 hours you need to get hired by a regional airline (in most cases). I believe that the job market will be ready for you by the time you’re competitive. As long as you have some way to pay for your training, I’d keep at it…which leads us to the next part of our discussion.
Right Now – Your Cash
No matter where you are in your pilot career, you need to preserve at least some cash right now. I hope no major airline has to furlough pilots, but it’s not out of the question. I believe some regional pilots will start to furlough soon. If this stretches out long enough, even Guard and Reserve units may not be able to employ everyone full-time. You need to be able to support your family in case your income temporarily drops, or disappears entirely. Do not rely on debt to finance your day-to-day life!
This means now is not the time to spend a bunch of money on cars, trucks, boats, or other toys. Now isn’t the time to buy a fancy new house, or make major upgrades to the one you own. Now is not the time to plan a giant wedding for your child, or a big family vacation (even though cruise lines are offering some killer deals).
In Chapter 14 of Pilot Math Treasure Bath I warned that each and every one of us runs the risk of becoming a “Deadzoner.” That’s a stark reality for pilots at TSA and Compass right now. It could be a reality for many more of us. You may not be there yet, but you need to fill up your Treasure Bath now so that you can take care of your family if your company puts you into this terrible position.
If you have any consumer debt (credit cards, car loans, etc.) you need to be crushing it right now. You don’t want that hanging over your head if your company hits hard times. After that, you need to save up enough of a cash cushion to cover at least a couple of months of your family’s living expenses without work.
You don’t have to go crazy here though and hold a full year’s worth of expenses as cash. In PMTB I outline ways to use a regular taxable brokerage account or a home equity line of credit (HELOC) as an emergency fund.
My wife and I decided last year that we wanted to pay off our house, so we started a regular taxable brokerage account with Vanguard to hold our payoff fund. We invested it 50/50 in Vanguards Total Stock Market and Total Bond Market index funds (VTSAX and VBTLX, respectively). With the market booming last year, our investments gained more than 20% in value. With the recent (and ongoing) market crash, our balance has decreased significantly from where it was. However, holding half of our account in bonds prevented a lot of loss. Those bonds haven’t suffered at all during the downturn. If we needed some quick cash to live on, we could sell those bonds, at a profit, and leave our stocks alone to regain their value in the future. Those shares of the VBTLX bond fund are essentially as good as cash. They’re still earmarked as a house payoff fund, but they could be our emergency living fund if necessary.
I recommend you set up something like this…a taxable brokerage account where you store some of your emergency savings. You can invest in both stocks and bonds to reduce the risks associated with volatility, while hopefully earning more than you’ll get from a savings account. Having mentioned investments, let’s make sure to cover all our bases there:
Right Now – Your Investments
First and foremost: do not sell your stocks or mutual funds to “minimize your losses!” This includes the stock-based funds in the TSP.
Yes, the market is down and your “balance is low.” However, until you sell your shares, that loss is only theoretical. The market will rebound, and your shares will regain their value. The only way you lose is if you sell now while the market is down. Let’s look at some history:
Can you tell that there was a terrifying stock market crash on 19 October 1987? The market lost 20% of its value in a single day. Oh no!
You may not notice it because that horrific occurrence is only a blip when you look at the market over the long term. This chart shows the S&P 500 dropping from $333.99 in August 1987 to $240.34 by the end of November. Guess what, it had reached a new all-time high over $342 by the end of July 1989, just 20 months after hitting rock-bottom.
The bust of the Dotcom Bubble in late 2000 is easier to see and lasted longer. It took 2-3 years for the market to bottom-out but was right back up to similar levels by the end of 2007. If you’d invested during the downturn, you could have made upwards of a 90% return in just a few years!
The Housing Bubble burst in 2008 for some of the worst losses since the Great Depression…then it climbed several hundred percent to the levels it had reached early this year. Even today as the markets are in the worst place they’ve been since 2009, they’re only as low as they were in September 2016, still a few hundred percent gain over the lows of 2009.
The point of all this is: over the very long term, the market is all but guaranteed to grow. Don’t sell now out of panic. Hold on to your shares and wait for prices to rise. (If you don’t want to take this pilot’s word for it, check out The Simple Path to Wealth by JL Collins.)
This also means that, once you have some emergency savings to make sure your family is taken care of, you need to be investing as much into the stock market as you can stand while everything is on sale. This means putting money into the C-Fund or one of the Lifecycle Funds in your TSP. This means investing your Roth IRA, HSA, and/or 401k in a broad-based, low-fee total stock market or S&P 500 index fund like VTSAX, FXAIX, FZROX, SWTSX, etc., depending on which brokerage you use for your investments.
You may be worried that the market will continue to go down for a while. I sure am. One common solution is to use a technique called Dollar Cost Averaging to put your money into the market in smaller chunks over time. If you’re smart, you’re automatically deducting money from each paycheck to put into your retirement accounts. Once you’ve maxed-out the limits of your tax-advantaged accounts for the year, see if you can spare enough to put into a regular taxable brokerage account.
I believe that COVID-19 will stop wreaking havoc on our society. I believe that the markets will rise back up to the level they were at just a few weeks ago, and then climb past that mark. If you can buy shares of low-fee index funds now, you will thank me in a couple years when you see how much interest you’ve earned.
Long Term – Jobs
We talked about what to do for employment in the short term. If you have a safe job, take advantage of it and build up your savings. Use the time you have to improve your competitiveness for your future jobs. If you’re hurting right now, do what you can to save cash and ride this out. I think jobs will open up sooner than you think.
For longer-term job considerations, I want you to think about what your ultimate goals are. I started Pilot Math Treasure Bath with several chapters aimed at helping you figure this out because I believe you will not end up happy and secure unless you have something meaningful to work toward.
If you’re dead-set on retiring from the military, go for it! You’ll have my respect and appreciation. However, realize the cost your family bears for you staying in. It’ll make sense financially, but there’s more to life than money. I will never stop asking: What do you love about military service that you can’t get in the Guard or Reserve? Don’t stay on Active Duty, passing up airline seniority, because you’re scared of making the transition or because of job uncertainty.
If your ultimate goal is to fly for the airlines, whether you plan to also serve in the Guard and Reserve or not, plan to get there as soon as you can. Seniority is everything! Delaying your transition for a bonus or an assignment will cost your family dearly in dollars and Quality of Life for the rest of your career. Again, find a way to get what you want in the Guard and Reserve and move on.
If you aren’t in the position to make that move yet, use your time to get yourself ready. Here’s a slightly older list of ways to make yourself more attractive for future flying jobs.
You might think that I’m overly optimistic about the value of an airline career when that industry went from amazing to terrible in just a couple weeks. First off, I truly believe things will turn around quickly (a year or two). Second, my family and I have already filled up our Treasure Bath. Worst case, we could live for the rest of our lives on the passive income from our investments. I cannot emphasize enough the peace of mind that comes from being in this position. Please consider applying Pilot Math in your life to secure your family’s future ASAP. If you do, downturns like this won’t even phase you.
Finally, I have a couple of lucrative side-hustles, and I’m confident that I could generate more money from these types of jobs if I needed to. I spent an entire chapter talking about side-hustles in PMTB because I believe they’re an important part of every pilot’s life. The Guard and Reserve make a great side-hustle that can become a full- or nearly-full-time job if things get bad. So can flight instructing, real estate, online course design, woodworking, and an endless list of other hobbies.
These side-hustles are good ways to spend your free time while you’re not flying. Some of them may be things you enjoy doing with your spouse, kids, or friends. They’re a way to earn a little extra beer money in addition to an airline job. However, in case of a catastrophe like COVID-19, they can mean the difference between solvency and panic for your family.
If you don’t already have a side-hustle, I recommend you consider picking one up. If you’re on Active Duty, you may not have a lot of time for this, but you can at least study and work on your skills. In light of the forced isolation caused by the Coronavirus panic, it’s probably a good idea to think of a side-hustle that can be done remotely in some form, if absolutely necessary. (There are a variety of ways to teach flying online, you can sell items from your woodshop on Etsy, and David Greene wrote an entire book about long-distance real estate investing.)
Long Term – Investments
Dealing with the short-term effects of COVID-19 brings up a lot of emotions. You may fear getting sick. You could likely feel frustration, boredom, and even loneliness from being isolated. Watching the balance in your investment accounts drop is always a gut check. Don’t let emotional reactions to these short-term problems impact your long-term success.
What are your goals for your investments?
Have you even ever asked yourself that question?
I spend a large portion of Pilot Math Treasure Bath trying to help you consider this question. Then, we take a hard look at real-world numbers to determine how much money is enough. Once you see these numbers, and you understand the potential for your money to grow (even under very conservative assumptions) you’ll realize that it doesn’t take all that long for you to reach your goals. As a major airline pilot, you can accrue a Treasure Bath deep enough to cover your family’s basic needs in under a decade. If you start that career having saved as a military officer or regional airline pilot, you’re even further ahead.
So, while you and your significant other are socially distancing yourselves from others in your house, take some time to figure out what your goals are. Then, look at what you have saved so far in your TSP, Roth IRA, 401k and other investment accounts. Realize that the market is down now, but will go back up. Once you’ve figured out how much money you’ll need available to spend each year, it’s simple math to figure out how long until you’ll reach your goal. The more you can save, the sooner you get there.
Even before you achieve your goal, making the decision to invest your money instead of spending it on meaningless stuff will make a difference in your life. You’ll find yourself getting less worked-up over drama at work, in politics, and at home. You’ll feel peace when it comes to your finances. You’ll realize that you have more energy to put toward the things that really matter in your life. You cannot lose once you start thinking long-term about saving for your family’s future!
Coronavirus is a tragedy, and we’ll be suffering from its effects for a while. However, it will pass just like every other plague we’ve experienced. Make sure you take care of yourself and your family in the short term. Stay fit and healthy, do what you can to secure your job. If you haven’t already, start considering a side-hustle to give you extra options. Save your cash, and invest as much as you can while the market is down.
Then, take advantage of this time to figure out your overarching goals in life. Once you know what those are, you and your family can vector your energy and your assets to making those things happen. I cannot emphasize enough how much peace you’ll achieve in your life when you no longer have to worry about making ends meet! Don’t worry if you’re not there yet. Use this crisis as an opportunity to draw yourself a road map, and you’ll be able to get there before you know it.
Stay healthy and fly safe.
This post’s feature image of a KC-46 parking is from: https://www.dvidshub.net/image/5171382/altus-afb-recieves-new-kc-46.
The “flatten the curve” graphic was originally posted by Dr. Drew Harris on Twitter.
The shot of the happy pilot is from: https://www.dvidshub.net/image/5999434/jolly-jordan.
The chart of S&P 500 performance was obtained by searching for “S&P 500” on Google.com.
The cover of The Simple Path to Wealth if from https://jlcollinsnh.com/2016/06/18/the-simple-path-to-wealth-is-now-published/. If you don’t want to buy it, you can get all of the same content in a less-polished format for free here.
The wooden frame is from etsy.com, where you can buy one for yourself.