Nobody is immune to the financial impact caused by the COVID-19 crisis.
As of Thursday, April 16, 2020, full lock-down order in the Kansas City area has officially extended into Mid-May. With the PPP loan out of funding, and many still waiting to go through the Unemployment Benefit Application process, how to stay above-water financially and how to maintain a healthy personal finance profile have become two of the most critical questions most of us now face.
For this exact reason, the financial advisors at The Jamison Edward Group has put together 5 financial tactics for you to follow during this challenging time, so that you can come out of the present pandemic with a steady and stable personal financial situation.
#1 Re-evaluate your income
The numbers you had before COVID-19 are probably no longer accurate in reflecting your current situation.
Here are some possible scenarios:
- You are considered an essential worker but your hours are cut
- You are working remote but your hours are cut
- You are working remote on a gig-by-gig basis (small business, freelancer, etc.)
- You are unable to work due to the shelter-in-place order but are eligible for unemployment
- You are unable to work and haven’t been able to get unemployment
The above situations are exactly why the first thing you need to do right now, is to re-calculate your income so you can get an updated version of your cash-flow structure, and adjust your spending budget accordingly.
#2 Count your assets
(That includes your cash-on-hand.)
Nobody wants to catch COVID-19, but…
Let’s face it: things do happen.
Knowing your assets and amount of cash-on-hand at this point is crucial, because it will allow you to make an estimate on how long your emergency funds and valuables will last with your usual spending habits, and whether or not you and your household need to adjust your expenses in case the pandemic goes on.
If your numbers look sufficient, try to segment out a portion of your available funds and assets and put them into the “no-touch” zone.
Consider anything in that zone your bottom line - your last resort in critical situations. You should not touch anything there unless it’s absolutely necessary.
#3 Consider opening up a new line of credit
Don’t think about opening up a new credit card right now as increasing spending. If you believe you are spending too much, then what you need to do is review your numbers, because excessive spending will be there regardless of a new line of credit.
That being said…
You should consider getting a new line of credit during the COVID-19 crisis in order to increase your emergency funds. The worst-case scenario of opening up a new line of credit is you barely use it. But in the best-case scenario, having an additional high-spending line of credit could be a lifesaver when needed.
#4 Cut unnecessary spendings
Cutting down unnecessary spendings will be one of the quickest ways to help you exit the COVID-19 crisis with a stable personal finance situation when time comes.
There are a few things you could do to identify your unnecessary spendings and thus reduce that number. For example:
- Review all your current subscriptions: is there anything you can cancel and live without at least during the lock-down period?
- Shop smarter: compare prices before making a purchase. In most cases, you should be able to find a better deal when it comes to groceries and other consumer goods.
- Self-discipline: we get it. Cooking everyday sucks, especially if you are not used to this task. With food delivery services still online, people can get easily carried away. That is why self-discipline is more important than ever when it comes to spending control.
Also, make sure you take out the spendings that were naturally cut due to the lockdown order, such as gas expenses and/or mileages, and other travel-associated expenses.
#5 Do not panic
Do not panic buy, and do not panic sell.
If you have an investment portfolio, the best thing to do right now is to stay calm and pace yourself. A global crisis such as the COVID-19 is going to have an impact on the economy regardless, and it is very likely that an investor will see a sharp drop within a short period of time temporarily.
It is never a good idea to be carried away by emotions when it comes to portfolio management, because so many different factors could decide whether the economy will continue to fall, how soon it will recover, and whether there will be more fluctuation in the future.
The best thing to do, in this case, would be staying grounded, and consult a professional financial advisor’s opinion before making a decision.
Keep Your Head Above The Water
In order to come out of a challenge strong and fit, it is always a good idea to consider the difficulties you see right now not as obstacles, but as opportunities.
If you have never looked into your finances before, now is a great time to get in touch with a personal financial advisor. According to the forecasts available from different sources, the COVID-19 pandemic is most likely to at least continue for another 6 months. While we may not be under full lockdown by then, whether our earnings would return to the previous situation is uncertain.
That is exactly why you should plan ahead to increase your risk tolerance. We cannot predict what may happen tomorrow, but we can at least prepare ourselves.