5 expert tips for working from home in a crowded house during the Coronavirus pandemic

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With much of the globe self-isolating, many people must suddenly manage the complexities of working from home while sharing a crowded space.

Kitchens, dining rooms and other spaces have become offices for remote work with computers, cords and paperwork spilling into what was, until very recently, private space. For people with children, these spaces are also the daycare and an impromptu home-school with everyone trying to remain productive in the middle of the chaos of competing demands.

The term “remote work” means different things to different people. Many think of it as working away from a central office or school by connecting through communication technologies, such as email, intranets and video conferencing. Academia has yet to establish a common definition for this type of work that is accepted by all. In this article, I’m using the term as it is currently being used by the public in reference to working from home.

As a teacher with a doctoral degree in business that focused on remote work, I have a unique vantage point for this emerging situation of working from home in a house full of people, of all ages. In order to be effective and minimize stress, I recommend taking time to create a structure that everyone agrees to.

Here are five ways to organize the home-work environment for a more successful transition.

Create workstations
Assigning a workstation to each person gives everyone a sense that they belong in the newly shared space, while setting boundaries for personal space.

The workstations should make sense for the work being done. If the work is loud and disruptive, like video conferences or multimedia streams, assign that work to a room with a door. For quiet work that requires concentration, ear plugs or headphones with white noise may be needed.

Taking a few moments to set up space for success will save the whole household from feeling frazzled.

Designate a work-free zone
If you have a home with a separate room for relaxing, such as a family room or den, consider making it a work-free zone.

In smaller places, this can be the bedrooms or even designated areas, such as a table with games and puzzles, or a corner with books and drawing materials. This can be especially helpful when there are children on the scene.

With daycares and schools closed, parents are scrambling to find ways to get work done and care for their kids.
Designating a space that is not for work is part of creating healthy work-life boundaries for psychological wellness.

Take scheduled breaks
The most common misconception about remote work is that it enables slackers. In fact, slacking is often more about personality and fit than the work context.

Successful remote workers are driven by the outcomes they are trying to deliver, and research shows they are not always exemplars of work-life balance.

Taking scheduled breaks not only keeps your mind fresh, but it also signals to others that wellness is important. If you are in self-isolation with children, your behaviour is teaching them what work-life looks like, so be sure to infuse a priority for wellness by modelling it yourself.

Integrate physical and creative activities
As adults, we know that it is important to make time for exercising and engaging our minds. Children have such activities scheduled into their school day, through recess, gym and creative subjects like art and music.

Running outside can help meet exercise needs and maintain your new social distancing routine. Hiking, walking and cross-country skiing are other activities where you can remain two metres away from others.
If you are self-isolating, it is essential to schedule physical and creative activity into each day — for everyone. If the weather allows, get outside, or plan to do indoor physical activities like yoga, dance games and interactive video games. Make it timed. Make it fun. The important thing is to schedule it.

It is also important to schedule time for creative activities. Consider how you can add the arts to the schedule, and remember: if it makes noise or a mess don’t schedule it for children when you don’t have the capacity to manage it, or it might not be the positive experience you are trying to create.

Establish a firm quitting time
A set quitting time helps us feel we have psychological control over our work. It also establishes boundaries and a sense of routine.

Children who are accustomed to timed periods, bells for breaks and a set time to go home still require structure and routine to make them feel safe, especially during these uncertain times. For children and adults, setting a timer and establishing the norm that work-time has a beginning and an end can signal familiar norms of the workplace and school, and lead to more effective behaviours for sharing space together.

Everyone feels the stress of uncertainty; everyone wants life to feel as normal as possible.

Protecting your family from an inheritance nightmare

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Estate planning is a topic that many people would rather not talk about too often, but it’s an important part of the entire financial planning process for anyone with responsibilities, whether they are family or business responsibilities.
With the current rate of divorce and people living longer, the number of blended families in Australia is increasing and family life is becoming increasingly complex. The need for comprehensive estate planning has never been more apparent.
For many people these days, it means considering all possible scenarios and implications when mapping out how they wish to have their estate – that is, all of their assets and money – managed after they die.
It isn’t easy making difficult decisions about loved ones, and it’s even tougher for those in de facto relationships and second or subsequent marriages, where there are children from previous relationships. The difficulty in choosing beneficiaries and amounts to be bequeathed means that many couples choose not to make a decision at all.

While estate planning laws vary in every state, wills are typically rendered invalid by marriage and may become partially invalid by divorce. So, it’s particularly important for everyone to make a new will after marrying or divorcing.

Following are just some of the estate planning issues you should consider, in consultation with your solicitor and financial planner:

Keep your will up to date – If you already have a will, you should update it when your financial or relationship circumstances change. While remarriage may revoke an existing will, divorce may not.

Provide for dependants in your will – If dependants do not have specified entitlements set out in a will, they may have to make a claim for entitlement through the courts, at expense of the estate.

Nominate guardians for your children – If you have children under the age of 18, appointing a guardian for them in your will may help avoid disputes between family members by making your intentions clear. However, it is not binding as the Family Court can override your choice of guardian and appoint a different guardian where it considers this to be in the child’s best interests.

Careful planning to minimise tax – The executor of a will may decide to sell the estate assets rather than pass them directly onto the beneficiaries. In this case, capital gains tax may be incurred, reducing the money the beneficiaries receive.

Bequeathing assets not owned – People need to understand what they can and can’t bequeath. Assets owned by joint tenants, trusts or companies can’t be included in a will.

Don’t assume superannuation will bypass the estate – Large super funds may automatically pay superannuation benefits to a deceased person’s estate. Having the funds included as part of the estate increases the risk of money falling into the wrong hands if the estate is challenged. To ensure superannuation benefits are paid directly to a beneficiary and not included as part of their estate, a person needs to provide a valid binding death benefit nomination directly to their super fund.

Testamentary Trust – To provide additional protection of your assets, a Testamentary Trust might be an option. Put simply, this is a trust established by a will.

Rather than assets being distributed upon death, some or all of the assets would remain in this trust for the benefit of a specific group of beneficiaries named in the will. There may also be tax advantages in having a testamentary trust due to the flexibility available to ensure that more income is distributed to ‘dependent’ children.

Let’s say a father leaves a sum of money to his son or daughter, who later separates from their spouse, the Family Court in a divorce settlement may rule that the spouse is entitled to a proportion of the inheritance. However, this risk could be reduced if the assets had been left to the children in a trust.

Be clear and concise – Ambiguity in a will can lead to unnecessary disputes over meaning, and the wishes of the deceased person may not be carried out as intended.
While the saying ‘you can’t rule from the grave’ carries some truth, planning for what will happen after you die will ensure your hard earned assets are protected and your wishes carried out.

While only a qualified practitioner can legally draw up a will, a financial planner can help you navigate your way through the complexities of estate planning and provide a framework for ensuring all considerations are covered when mapping out your final wishes.

This editorial contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider you financial situation and needs before making any decisions based on this information.

Planning to avoid financial mistakes

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Selling shares when prices have tumbled or buying a house at the height of a property boom only to dispose of it when the market falls are among the financial set-backs that can happen to anyone on the road to retirement.

Everyone makes mistakes during their investment lifetime; the trick is to avoid them when you can and learn from the ones you can’t.

Have a plan
Failing to plan for retirement and build up savings is one of the most common mistakes. Having adequate retirement funds can be undermined by unrealistic expectations about future lifestyle and the savings needed to fund it.

Many retirees are unable to access the age pension because they are asset rich despite being income poor. Putting well thought out investment plans in place to boost your retirement income well before you reach retirement age is the best strategy to overcome such a problem.

It’s probably no surprise you are more likely to achieve your financial goals if you have a plan. In the construction of a financial plan you should take account of your risk tolerance, your financial commitments and financial and lifestyle goals. This will give you the confidence to know you can get to your desired destination. A comprehensive plan should also take account of tax, cash flow, superannuation, insurance needs and estate planning issues.

Stay calm
Impulsive decision-making at the first sign of trouble can undermine your investment goals. If a quality share investment or rental property suddenly falls in price due to a market correction, it is often not the best time to offload. As one once put it, “Don’t just do something, sit there”.

Staying the course and letting time work its magic will often leave you in a stronger position.
Equally, investment inertia can be problematic. Strong or poor performance can lead to your investment portfolio moving outside your required risk tolerance over time. Regular reviews to rebalance investments back to your target asset allocation will more likely bear fruit in the long term.

Spend less than you earn
Drawing up a budget is vital if you want to discipline yourself to spend less than you earn. Failing to budget makes it difficult to keep track of spending and set aside regular savings to fund a comfortable retirement.

Bank transaction accounts are ideal for daily spending money but not investment money. In order to beat inflation and produce the returns you need to fund your financial goals over time, you need to build a diversified investment portfolio to match your capital requirements.

Spreading money across the major asset classes of cash, fixed interest, shares and property helps minimise risk. It also helps produce consistent returns from a combination of income and capital growth over the long run. The precise combination of assets is dependent on your risk profile. Your adviser should undertake comprehensive research and implement proven portfolio construction principles.

It’s never too late
It’s never too late to start planning for retirement. Paying off the mortgage is often considered the first step to wealth creation so increase repayments where possible to speed up the process. Once you have built up equity in your home other investment options can be investigated concurrently.

Topping up your super through salary sacrifice is one such option, provided you stay within your annual contribution limits. Your employer pays a proportion of your pre-tax salary into your super fund, reducing tax and boosting your savings at the same time.

Review regularly
Financial planning is a dynamic process. Regularly reviewing your investments, refraining from knee-jerk reactions, understanding market volatility and staying the course can lay the foundations for a prosperous retirement.

This editorial contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider you financial situation and needs before making any decisions based on this information.

The Coronavirus pandemic and the economy

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Introduction

Along with the horrible human consequences, the coronavirus pandemic is having a huge impact on the way we live and as a result investment markets. This has raised a whole bunch of questions: why does a big part of the economy have to go into “hibernation”? how long might it be for? how big will the hit to the economy be? what does it mean for unemployment? why is it so important for governments and central banks to protect businesses and workers? can we afford all this stimulus? This note provides a simple Q&A for most of the main issues from an economic & investment perspective. To the extent simple answers are possible in this environment!

Why do we need the shutdowns?

This is a medical issue, but it drives everything that follows. The answer is simple. Something like 15% of those who get coronavirus need hospitalisation and 5% need intensive care. And this is not just elderly people. And there is little to no community immunity to it. So, if a lot of people get it at once the hospital system can’t cope and the death rate shoots higher. Italy shows this with a death rate of 11.7%. So, unless we want to see the same surge in deaths as Italy we have to “flatten the curve” of new cases so the hospital system can cope. And to do this we have to practice social distancing which means meeting up with as few as people as possible which means staying at home wherever possible. This in turn means a big part of the economy gets shutdown.

Which sectors of the economy are most impacted?

Roughly 25% of the economy is being severely impacted and this covers discretionary retailing, tourism, accommodation, cafes, clubs, bars and restaurants, property and various personal services. But there is also likely to be a flow on to construction and parts of manufacturing as uncertainty leads to less housing construction for example. Only about 20% of the economy – communications, healthcare and public administration – will really get a boost.

How big will the hit to the economy be?

It’s impossible to be precise, but if 25% of the economy contracts by 50% with other sectors offsetting each other, that will drive a 12.5% detraction in economic activity mainly in the June quarter which is basically what we are assuming. This will the biggest hit to the economy seen since the Great Depression. Of course, if this leads to collateral or second round effects as, for example, businesses and households default on their loans the impact could be much greater and longer.

But why all the talk of hibernation?

The hibernation concept is a good way to look at it. As a result of the shutdown many businesses are seeing a massive loss in their sales and some must partially, or in many cases fully, shutdown until the virus is contained and the shutdowns can end. But rather than shutdown forever the best outcome is for them and their employees to effectively go into “hibernation” for a period so they can go back into business and resume their normal lives once the virus is under control but without being encumbered with so much more debt and rent arrears, etc, that they go bust anyway.

Why the need for massive government support?

This is where government and central bank action comes in. Since coronavirus became a global pandemic last month and countries progressively ramped up social distancing policies, governments and central banks have swung into action to help economies weather this storm. This is absolutely necessary. Such support is unlikely to stop a recession or depression like contraction in the economy. But it’s needed to minimise the collateral or second round impacts of the shutdowns and enable the economy to start up again when the threat from the virus abates. Australia has announced three fiscal stimulus tranches now totalling around $200bn or 10% of GDP, which is nearly double that of the GFC stimulus. Other countries have also announced massive stimulus with the US just signing off on one package worth $US2 trillion and now talking of another. The policy response is now of a magnitude that it’s starting to tip the risk scales against some sort of long depression/recession.

How will it be paid for?

Simple, the Government will issue bonds & borrow the money.

But can we afford such a surge in the deficit and debt?

First, to stress it’s absolutely necessary. The hit to the economy from the shutdowns could be 10 to 15% of GDP. This requires a similarly sized stimulus program to offset it otherwise we risk immeasurable collateral damage to the economy and people’s lives (causing an even bigger budget deficit).

Second, it makes sense for the public sector to borrow from households and businesses at a time when they are stuck at home and can’t spend due to the shutdowns or won’t spend due to uncertainty and for the Government to give the borrowed funds to help those businesses and individuals that are directly impacted. Using the funds to subsidise wages is a particularly smart move as it keeps people employed and keeps them linked to their employer. The trick is to curtail the stimulus once the economy bounces back otherwise the competition for funds will boost interest rates and create problems for the economy. So, the support programs are set to end after 15 months.

Third, Australia’s public debt is relatively low. Net public debt as a share of GDP is a quarter of what it is in the US. So, Australia has far greater scope to do fiscal stimulus than other countries.

Fourth, the cost of borrowing for the Federal Government is very low at just 0.25% for three years and 0.75% for ten years.

Finally, the budget blowout may risk a downgrade in Australia’s AAA sovereign debt rating, but Australia’s public finances will still look better than others. And I would rather a rating downgrade than a deep depression/recession any day.

When the dust settles Australia will be left with higher net public debt at maybe around 45-50% of GDP. It will be the price we paid to (hopefully) minimise the loss of life from the virus and at the same time minimise the hit to people’s livelihoods from the shutdown. This may necessitate forgoing the next round of tax cuts or a new deficit levy. And it may put a burden on future generations as wartime spending did. But I reckon that’s a cost most Australians are prepared to wear.

Why is monetary stimulus necessary? Low interest rates won’t get us to spend when we are stuck at home

Yes, people can’t spend much now, but as with government stimulus much of the central bank easing has been aimed at “protecting” the economy. This has three key elements:

lowering interest rates to make it easier for borrowers to service their loans – eg, the RBA has cut interest rates and targeted lower bond yields to cut long term borrowing costs;
pumping money into financial markets to make sure they keep functioning. As the crisis intensified bond yields perversely started to rise (as fund managers had to sell their liquid winning assets to meet redemptions) and corporate borrowing rates surged as investors feared defaults so the Fed pumped money into the US bond and credit markets to push yields back down. The ECB has done something similar in Europe by buying Italian bonds; and
ensuring cheap access to funds for borrowers – eg, the RBA has provided funding for banks for 3 years at 0.25% which has enabled the banks to cut rates and offer debt payment holidays. The Fed is even undertaking direct lending.
How does quantitative easing help the government stimulus measures? Won’t it cause inflation?

Quantitative easing – which the RBA has now joined the Fed, ECB and Bank of Japan in doing – involves using printed money to buy government bonds in order to help keep interest rates down. The central bank buys these bonds in the secondary market (eg from fund managers) so it’s not directly providing the money to the government and those bonds must still be paid back when they mature. So, it’s not really “helicopter money” – which would see the RBA print money and give it to the Government which it would then spend. But of course, it is aiding the government’s stimulus program by helping to keep bond yields down. In the meantime, the balance sheet of the RBA will rise as it holds more bonds, but this is not a major issue unless inflation starts to rise due to all the extra printed money in the system. The Fed, ECB and Bank of Japan have been doing QE for years with no rise in inflation, so the RBA has a long way to go before it becomes a problem. Put simply there is no magical right or wrong level for the RBA’s balance sheet so if you are worried about it, just ‘chillax’.

How high will unemployment go?

We see unemployment rising well above 10% in the US (possibly to even 25%). But in Australia, there is a good chance that the Government’s wage subsidy scheme will keep up to 6 million workers in the most affected parts of the economy in a job and this may contain unemployment to below 10% here. The decline in unemployment though will likely be slow though depending on the shape of the recovery.

Will the recovery in the level of economic activity look a V, a U or an L?

Much will depend on how long it takes to control the virus. An L shaped (or no real) recovery is unlikely given: evidence that shutdowns will slow down the number of new cases as occurred in China and may now be starting to occur in Italy; the chances of a medical breakthrough; and all the stimulus which should aid some sort of recovery. By the same token a quick V style recovery is unlikely given that absent a quick medical solution the shutdowns will be phased down only gradually (with international travel being perhaps the last restriction to be removed). This suggests a U-shaped recovery is most likely.

Could anti-virals or a vaccine improve the outlook?

Put simply yes. A study of past epidemics and the medical response to them by my colleague Brad Creighton shows an ability of governments working with scientists and the medical community to rapidly speed up the development and deployment of anti-virals and vaccines. There is now a massive global effort on this front and some drugs are promising. So, it’s not out the question that there is a breakthrough enabling a quicker relaxation of shutdowns.

When will shares recover?

The historical record of share markets through a long litany of crises tell us they will recover and resume their long-term rising trend. The massive global policy response to support economies in the face of coronavirus driven shutdowns is starting to tilt the risk scales against a long depression scenario. This is why share markets have started to get some footing over the last week or so after seemingly being in free fall for a month. Key things to watch for a sustained bottom are: signs the number of new cases is peaking – with positive signs emerging in Italy; the successful deployment of anti-virals; signs that corporate and household stress is being successfully kept to a minimum – too early to tell; signs that market liquidity is being maintained and supported as appropriate by authorities – this has improved; and extreme investor bearishness – investor panic is already evident but it can get worse.