With the rapid spread of the coronavirus, the world have been grappling with the effects of this pandemic. As companies across the globe shut their operations, a tremendous number of people are experiencing job losses. To make matters worse, the economy hasn’t been showing any encouraging signs, directly impacting investors’ wealth and peace of mind.
In other words, people have a good reason to be concerned about their finances during the ongoing COVID-19 pandemic. With a high degree of uncertainty about everything, it is crucial, now more than ever, to rethink and restructure your financial plan so that it helps you spend less and save more.
Here are a few tips in this regard.
1. Realign Your Finances
With the lockdown compelling everyone to stay at home, you will have ample time to revisit and prioritize your financial goals. If your income has been impacted, it is sure to have consequences on your monthly budget, EMI payments, insurance premiums, investments, and asset acquisition plans.
In fact, you may even have to break your savings funds to deal with emergencies. This makes it all the more important for you to prioritize your financial plan. Depending on your goals, you will need to realign your financial strategies to make it through the pandemic.
2. Do Not Let Fear Influence Your Decisions
The global pandemic has upset the global market conditions and the predominant sentiment is that of uncertainty. In such a situation, it can be challenging to stay calm and make rational financial decisions, keeping in mind your long-term goals. This can be disastrous.
If you’re having a hard time keeping your fear of losing money in check, work with a financial expert. An experienced financial advisor will help you make the right moves as he/she will be objective in analyzing the situation and making long-term projections.
However, whether you hire a financial advisor in Tokyo or work with Florida financial advisors, make sure to be patient and ride out the waiting period, especially if you have long-term investments.
While the nationwide lockdown can make people fearful, it is best to keep this emotion out of all your financial decisions. Keep calm and know that investments will gradually pick up once things start normalizing.
3. Focus on Closing Debts
In challenging situations such as the ongoing pandemic, it is always a good idea to budget for the upcoming months and stick to it. Creating a monthly budget will make your financial situation crystal clear and you will be able to allocate your money well.
If you find you have expendable money, use it wisely and close your debts or reduce loan obligations, if any. This step will bring down the interest cost, thereby reducing your debt burden to an extent.
4. Reduce Your Expenses
Taking a cue from the above point, monitor your monthly budget closely and find out where most of your outflow is. If possible, find a way to reduce that expense. Refrain from panic-buying and cut back on non-essential spending. You may already be saving the money that you’d spend on commuting, travelling, eating out, and entertainment. All these steps will help you build a healthy corpus during the pandemic.
5. Improve Your Emergency Fund
If you’re fortunate enough to still be employed with a steady income, then use this time to build an emergency fund. After all, you never how long the pandemic will last and how it may affect you.
Some of you may already have an emergency fund in place, which you can now enhance with the income you receive. This can be highly effective in combination with lowered spending. Another way to grow your emergency fund is to save your tax refund. If you haven’t already used this money, save it for a rainy day.
In case your job is affected by the pandemic later on, it will help to have a strong emergency fund to support you and your family.
6. Keep Sufficient Liquidity for Urgencies
During a crisis, it is crucial to have sufficient liquidity to fulfil your day-to-day requirements. It is, therefore, prudent to always keep your money in instruments that can be easily liquidated. Even when budgeting, aim for saving an amount that would suffice even if the lockdown is extended.
7. Make the Most of Low Interest Rates
With the uncertainty taking over, the market has been fluctuating and interest rates dropping. You can take advantage of these low rates for all kinds of borrowing, especially if you have a good credit score.
If you have debts to be paid, the time is right for refinancing and potentially saving thousands of dollars over the course of the loan repayment. Although this will involve considerable paperwork, it will benefit you while also keeping you occupied at home for the weeks ahead.
8. Stick to Your Investment Plan
As mentioned, the stock market has been volatile in the pandemic. However, it is important that you do not panic and start selling your stocks during this time. This is simply not a good idea. In fact, doing so can result in a realized loss of thousands of dollars.
We understand that it can be heart-wrenching to watch your investments take a tumble. However, in all likelihood, the market will recover when normalcy is restored. It is best to leave your invested money untouched, hold on to it, and ride out the storm. Times may be tough, but selling your stocks for a loss should never be an option. It is always better to evaluate your investment plan and find the patience to stick to it.
9. Take Care of Your Health and Wealth
Guarding your health is of utmost importance during the pandemic. It is necessary that you stay at home, abide by the social distancing guidelines, and take proper precautions and care. At the same time, you should also get health insurance to protect your wealth, if possible.
Several online platforms offer financial products digitally through paperless transactions and zero human contact. You may want to consider these to safeguard your health and wealth.
While the COVID-19 pandemic has forced the world to slow down, it does not mean that your financial plan should be derailed. In fact, now may be the right time to take certain measures to fortify your financial security. Take the right actions before the virus impacts your life and money. If you’ve already been affected by it, take necessary steps to mitigate the long-term financial damage. If you have trouble doing so, engage the services of reputed financial advisors at the earliest and sort out the issues before they get out of hand. In short, do what it takes to guard your health and wealth optimally.