As of this writing, Covid-19 has claimed the lives of over 200,000 Americans. That is a tragedy. It has also precipitated the fall of countless businesses. According to Bloomberg, 58% of small business owners are concerned they may have to close their doors forever. Small businesses are disappearing by the thousands and when all the dust settles the carnage may be even worse. That’s because many small businesses do not have any debt. When they fail, they do not turn up in bankruptcy court so the loss goes uncounted.

That is bad news for the U.S. economy. Small businesses account for 44% of U.S. economic activity and employ nearly half of all American workers.

The Bigger They Are, The Harder They Fall

The damage caused by Covid-19 shutdowns is not limited to small business. Big companies have been hit hard as well. Those that have filed for bankruptcy include J. C. Penney, Neiman Marcus, J. Crew, Brooks Brothers, Tuesday Morning, Pier 1, GNC, Lord & Taylor, and Stein Mart.

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According to the TSA, air travel in September was down 66% compared to the same time last year. As dismal as that may sound, it’s cause for celebration compared to what's happening in the cruise industry. It’s difficult to find an adjective that accurately portrays it. Decimated and eviscerated don't do it justice.

The restaurant industry is a major Covid-19 business casualty. Chuck E Cheese, California Pizza Kitchen, and Sizzler have all declared bankruptcy. Others teetering on the brink include Dave & Buster’s, Checkers, and Steak ‘n Shake.

Lessons Learned

If they could do it over again, do you think those hit hardest by Covid-19 would choose to be in the same business? Probably not. After being closed for months and then restricted to 25-50% capacity with no alcohol sales, many independent restaurants have thrown in towel. Ditto for shop owners who've been shuttered for months. They've lost everything.

Obviously, there is no way to prepare for every scenario. Life happens, there are no rehearsals or do-overs. However, there is one takeaway to be gleaned from all this, a sentiment shared by survivors of the Great Depression: don't overextend yourself. Do not reach so far that if one thing goes wrong you're doomed to failure. In other words, be frugal.

Final Thoughts

Many financial professionals recommend maintaining an Emergency Fund equal to 6-12 months of living expenses. That is simply crazy talk to some people. Impossible. Many of those same people live far beyond their means and are one or two missed paychecks from financial ruin.

Twelve months may be a bit extreme, but certainly six months is doable. Aside from an emergency fund's primary purpose which is to survive a job loss, other unforeseen circumstances may come along. Things like unexpected medical bills, major home repairs, or the declining health of a family member.

The broader message is to save money and be financially conservative. It gives you peace of mind knowing that if you lose your job you can maintain your lifestyle without going into debt.

Eggstack News will never post an article influenced by an outside company or advertiser. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future. This article is for informational purposes only and is not financial advice or any other type of advice. Eggstack makes no representation to the validity, accuracy, completeness, or suitability of purpose of any information presented in this article.