As a former corporate pilot of ten years, I am devastated to see what COVID-19 has done to an industry that remains very close to my heart. If you would had told me six months ago that planes would be parked and that massive amounts of pilots would be unemployed, I would not have believed you. The aviation industry was as strong as it had ever been. Very few pilots were sitting at home wondering where their next paycheck would come from. However, COVID-19 put the world and the economy on an alternate flight path. Many close friends of mine are experiencing turmoil in what was widely thought to be a safe and steady career path.
All of this has caused me to look back at my former life and realize that I was no different. In recent years we as pilots have been used to strong markets, great employment, and a steady paycheck. For many pilots, including myself, we were shielded from many economic and world issues. Now, we find ourselves at ground zero when it comes to the economic impact. I realize that I am in a unique position to be able, given my industry experience matched with my Finance MBA, to assist my fellow pilots through this economic storm.
If there is a bright side to all of this economic devastation, it is that we can use this free time to reflect and better ourselves. One thing that I am confident in is that at some point things will return to normal. There will be a day when we will all be back in the skies, and COVID-19 will be firmly in our rear view mirror. The challenge now is getting to that point. Take the appropriate steps now to make sure that you and your family will be back on your feet quickly, and also in much better shape the next time that something comes up impacting the overall economy (and inevitably something will). While there is absolutely nothing that we can do to control what is currently happening, what we can control is how we respond and the financial future of us and our families.
The first thing that I want to talk about are immediate needs. I put together a quick game plan:
- If you lost your job, file immediately for unemployment. Currently, the federal government is offering an additional $600 per week on top of normal state benefits. Do not wait! If you lost your job, you have paid into the system and are entitled to benefits.
- If you are self employed, look into some of the provisions of the CARES act, specifically the disaster funding and PPP (see our prior blog post). Although funds are currently exhausted at the time of publication, it is widely anticipated that the programs will receive additional funding. You may also be eligible for unemployment.
- Create a budget and cut back where necessary.
- Understand that you may have to reach into savings at this time. This is why we save!
- If necessary, you can tap into retirement savings (up to $100,000) without paying the 10% penalty for early withdrawal. Additionally, you have up to three years to either replace that withdrawal or pay the income tax on it. Keep in mind, using these provisions requires a valid COVID-19 related reason for doing so. This includes being diagnosed (or having a spouse or dependent diagnosed) with COVID-19 or experiencing a layoff, furlough, reduction in hours, or lack of childcare.
- If your 401(k) does not currently permit this withdrawal, and you are let go, you can always rollover the 401(k) to an IRA and then use these provisions. Even if you haven't lost your job, some 401(k)'s allow in service rollovers to an IRA.
- Review benefits that you may have lost, including health and life insurance. In some cases, you will be permitted to continue for a specified period of time. In others, you may have to see what is available on the private market. Either way, it is important to understand what you have and what action that you may need to take.
Next, I want to discuss getting back in the air once this is over:
- Do not wait until everything resumes. Start now! There are many pilots currently out of a seat and there will be a lot of competition as the marketplace opens back up.
- Leverage all of your industry connections. Check in on chief pilots, flight department managers, pilot friends, and anyone else that could connect you to whomever is in charge of hiring for their company. Get your name out there now! Let them know that you understand that they may not be hiring now, but you want to start the dialogue for when things start to come back online.
- Go to hiring sites such as Climbto350 and JSFirm daily.
- Connect with industry professionals on social media sites such as LinkedIn and Facebook.
- Spend time interacting with other professionals on some of the group discussion boards such as Professional Jet Pilots.
- I cannot stress enough to start this process now if you do not currently have a job.
Finally, I wanted to discuss securing your financial future to protect yourself against future challenges
- Establish an emergency fund. This is too easy to forget in when times are good. You should have at least 3-12 months in a cash type savings account that is readily accessible. How much exactly depends on your family situation, your risk tolerance, and your level of debt.
- Review your financial plan. If you do not have one, that is the problem! I will be happy to help anyone in the industry with no obligation.
- Reassess your investments and risk tolerance. Are you happy with the way that your investments performed? Did they do what was expected? Do you have expectations? While we may not know WHAT the next crisis will be, we do know that there WILL be one. It is important to understand that and to understand what will happen to you when it occurs.
- If you lost your job, consider rolling over your 401(k) to an IRA. This could open up your options to the entire world of investments.
- Considering hiring a financial advisor that understands your situation and will work with you to accomplish all of the above.
In closure, I want to ask a simple question - who do you think is better positioned to come out of this crisis on top - someone with a plan, or someone who wings it? (no pun intended)
Now is the time to take charge of your financial future. Call me at 724-561-4864 to set up a no cost, no obligation review of your current situation.
Nick Castellino
M.B.A, Finance
B.S. Aviation Technology
Nick@VaultWealthManagement.com
(724) 561-4864