Rules for financial plan during COVID-19
It is a statement of fact that we have all found ourselves in uncharted territory in all aspects of our lives today. The outbreak of COVID-19 as a global health emergency has pushed most countries, states and cities into varying degrees of lockdown. Businesses have either come to a standstill or are trying to best manage operations through widespread digital mediums. Individuals are now covering their faces and maintaining social distancing. Instead of chasing business and financial goals, the emphasis has now shifted to maintaining proper health and exercising caution to contain the spread of the Coronavirus. In these times of crisis, it becomes imperative more than ever to take care of one’s financial health as well.
Why? Well, for the simple reason that the pandemic has adversely affected most individual incomes, bank balances and cash flow prospects. For instance, if you are a young person, you are now forced to wonder if you can still take care of your everyday needs, get a job, buy a car, get married the way you dreamt, etc.
As a father or mother, can you still feed your kids, pay bills, maintain a lifestyle and save money for the rainy day? Is your job safe? Would you be able to run your business? Is your line of business still relevant? Have you spent your savings already? Do you downsize your staff, change operations, etc.? As a retiree, you know that low interest rates have set in, so your fund accounts earnings have been eroded. As a fixed income earner, inflation has wiped out your savings and value of stocks as we speak! No one is spared!
So the question is what do you do? My overly simple response is, it is time to set up a workable and SMART personal financial plan.
Let me start by defining or describing personal financial planning – it typically involves creating a personal budget, planning for taxes, setting up a savings account, creating an emergency fund or Mad money and developing a debt management and/or recovery plan. Here are some simple ways in which we all can address growing personal financial concerns at this crisis time. Let me quickly add that going forward we would be wise to cultivate the habits of financial planning because they stabilize us in both good and bad times.
Prioritize and revisit your financial Goals
Take some time to review and prioritize your financial goals. Since business activities have been slowed or halted, it would have an impact on your income, which in turn, would put pressure on the monthly budget, Insurance premiums, investments and increase in the number of people asking you for help. Most people have had to break their savings funds to meet up with these critical emergencies. Your financial goals would thus need to be realigned to ride out this global crisis. A few things you should look at: –
1. Inventory – Take stock of what you have – starting from your pantry, store and bathroom cabinets. If you have what you think is enough supply of foods, toiletries and medications, then don’t buy more. You may need the cash and some may expire on your shelves.
2. Expenses – Your spending patterns must have changed as a result of “stay at home” orders. For example, buying aso ebi has been on hold while buying food in bulk is now favorable etc., but many of your fixed expenses have not gone away. Now could be a great time to take a close look at your expenses and to understand what they really are. You can also identify what expenses are most important and which could be reduced or dropped entirety. In a nutshell, exercise self-control; don’t give in to unnecessary or impulse spending.
3. Income – With business grinding to a halt, many companies are implementing layoffs or reducing salaries. If you are retired and living off your portfolio, dividends are likely to be cut and interest rates have already dropped sharply.
4. The way we do banking – most of the elderly ones among us had money in our accounts but couldn’t access the funds immediately the lockdowns set in because they had not upgraded their banking habits. They had no ATM Cards; didn’t do mobile online banking, so they got stuck. May I respectfully suggest that you upgrade your banking skills and cultivate a good relationship with your account officer!
5. Debt – With interest rates at historic lows, you should explore the possibility of refinancing any debt you have. The mortgage market is a little crazy right now so a refinance might be difficult, but it is worth exploring. This could help you with your cash flow in this critical time.
• Stop making decisions based on Fear
The old saying “Patience is a virtue” could not be more relevant in the present situation. While nationwide lockdowns may spur fear, please understand that nothing is permanent. The tough times, as they say, don’t last but tough people do! To the same end, try and act rationally, as much as possible.
To be continued tomorrow.
Egbuna PhD, is an economist and author. She wrote in from email@example.com
No comments yet