COVID-19 can put a nail in FIRE's coffin and what you can do about it

It may well be that COVID-19's real damage is economic in nature and a lot of folks around the world may die as a result of lockdowns and the destruction of businesses.

A major phenomenon I am seeing at the very least is that all of the traditional advantages of FIRE living have been nullified by the COVID-19 crisis. Employees are working from home so that is not significantly different from those who leave the rat race. And no one has the freedom to travel at all.

Things can get worse from here.

I know my personal expense has been cut by half, so my vendors are definitely earning less. If folks are given temporary relief from mortgages, then banks can't collect interest or principal payments. Businesses that can't pay rent will affect the landlord. SPH REIT even slashed dividends by 80% risking corporate taxes to shore up for bleaker future. I suspect many other REIT managers will take their lead.

For folks recently financial independent, they may have to either go back to work or start drawing down on their cash cushions which are probably one of the best things to come up from the FIRE movement to cope with the sequence of return risk.

This is what I am doing for the next few months beyond just deleveraging:

a) Take on extra work if you can

In my case, I have been working and reporting taxes for the past two years. We've moved into webinars so my work schedule has not changed at all.

For the rest who have FI-ed, there are plenty of jobs what you can do to get out of the house. If you do temperature scanning, it is an added $1,900+ that can be farmed into buying more discounted stocks. The best thing is that a short-term contract will allow you to go back to your old FI life later on.

b) Don't take on new expenses. Instead, reduce them aggressively

One major improvement in my life is better health from having a personal instructor. I just had my last session and expressed an interest to continue but only if I can somehow get more financial security over the next few weeks. If payments get delayed, then I have to insource my physical training and switch to exercises which are less beneficial.

But that's a first-world problem.

I also believe that there is no reason why a homeowner should not defer mortgage payments. Even if you have money set aside to do so, you can always pay in one lump sum after the market recovers. The money is useful to deal with emergencies over the shorter term.

c) Will assume that March dividends will be the last ones I will get for the next 1 year.

Any dividends I receive from now on is a bonus and I should be reinvesting it anyway. Analyst reports are reporting at least a 20% cut in DPU in retail REITs and I expect things to be much worse in practice.

The upside of all this is that more bargains will appear in the markets and nibbling stocks is what I will be doing over the next year once I secured my family's personal expenses.

In summary, I think that if FIRE folks suffer, doing the alternative is worse. If you have been following Kristy Shen's variant of FIRE, you should actually be still quite comfortable this crisis because of your cash cushion and yield shield. Even if a lot of nay-sayers come after you at this time, your position should still be many times stronger than your critics.

I don't think the YOLOs have very much to say at this stage because they are losing jobs and may not have enough to last through the crisis. Gig economy workers are looking at 30% cuts in revenue and corporate workers will have to be let go soon if their corporates struggle for too long. Also, those over-leveraged in the physical property asset class will face a reckoning next.