How to prepare yourself financially during a pandemic

The novel coronavirus is now a global concern. Here are some things to follow to be financially prepared in these trying times.

It may be hard for many to digest the effect of the unprecedented chain of events that unfolded in the last two months. The COVID-19 epidemic has affected many lives and resulted in a massive slowdown of the economy on a global level. A nationwide lockdown has been imposed in many countries, including India. While this may seem like a time to relax, spend time with family, and finish those lockdown Netflix series, paying heed to your finances is also equally crucial. 

1. Adverse effects of the coronavirus outbreak

• Delayed salaries: With social distancing measures in place, all offices, schools, markets, malls, and even non-essential clinics like dentists, dermatologists, etc. have shut down. Some industries have adopted the work-from-home model, but many others have had to shut operations altogether. The chain reaction caused by closing down even a few factories or operations causes a ripple effect in the economy. Every business has a team of professionals who handle employees’ salaries, reimbursements, and other financial obligations. With a lockdown in place, the chances of salaries being delayed are high. 
• Mounting expenses: The government may have announced a lockdown for schools, but that does not mean parents can stop paying the required fees. Many schools charge quarterly or half-yearly fees in advance. With an increased awareness of the issue, many schools are waiving fees, but there could be other looming expenses. House rent, private debt instalments, water and electricity bills, etc., are some recurring costs that cannot be ignored even during the coronavirus pandemic. 
• Loss of jobs: Coronavirus effects are not just limited to a person’s health. Companies may soon have to let go of employees to cut costs. With everything at a standstill, businesses have lost their customers. The stock market is crashing, and organisations are running into losses. For most businesses, the first strategy to minimise the damage is to trim their workforce. Losing a job now can make the already harsh times even more challenging. 

Related: FM Sitharaman announces economic relief measures to quash coronavirus impact

2. Steps for people to financially secure the future 

• Save more: A strategy that has proven to be valuable at all times is the practice of saving. With families observing self-quarantine, there is no possibility of going out and spending money on extravagant meals, movies, vacations, commutes, etc. This may sound like a very small portion of a household’s spending but forms a major chunk of it in reality. It is important for people to save this amount and utilise it for needs that may arise later. 
• Cut costs: The coronavirus crisis has led people to hoard commodities like food, sanitary and hygiene products, etc. People are also experiencing anxiety and boredom because of which they tend to eat more and run out of their groceries sooner. While a shortage of essential products is unlikely (as the government assures us time and again), the mentality to hoard is affecting many bank balances. Just like being mindful of washing hands and maintaining respiratory hygiene, one should also spend their money sensibly. It is imperative to buy only what is needed and cut back wherever possible. 
• Avoid using credit cards: A credit card offers convenience but can prove expensive in these times because of high interest rates. Unless it’s absolutely necessary, you should avoid using a credit card. Sticking to cash or debit cards will make budgeting easier and give you a fairly accurate picture of your financial standing. 
• Don’t stop investing: The fear surrounding COVID-19 has caused many people to take drastic steps. Some have hurriedly withdrawn contributions from retirement accounts, fixed deposits, recurring deposits, etc. to avoid running out of money during the lockdown. While keeping a certain amount of money at home at all times is a wise strategy, the likelihood of needing all your savings at once is very rare. It is essential for individuals to continue saving for their future and contribute to their retirement funds just as before. 
• Have a flexible financial plan: Perhaps the most critical point to note is to have a plan that can cope with the changing times. Economists feel the world may never go back to the way it was before the economy slowdown due to the pandemic. While it is hard to predict what the future holds, it is evident that the path to recovery could be slow. In such times, it is necessary to have a financial plan that can be altered as necessary. The stock market is expected to crash, but some financial advisors believe that investing in it now can allow you to reap great returns in the long run. You should ideally consult a professional financial advisor and devise a new plan that can benefit you in the coming months. 

Related: How to manage market risks and keep your portfolio secure? 

Last words

It is vital to follow coronavirus precautions right now, for the sake of both your health and your finances. Being mentally prepared, saving more, and cutting out avoidable costs can offer more stability and purpose to your financial plans. Tough times may call for desperate measures, but being agile and ready can prove to be a great advantage. 

To know what investment decisions you should make during the global pandemic, read this detailed article.