Owing to the global lock-down, the stock markets have plummeted, workers have been forced to stay home from work, schools have shut, and many small businesses face financial problems due to the uncertainty the pandemic has brought about.
In such times, it is only natural to have significant financial concerns.
There are some smart financial moves you can take during the novel coronavirus outbreak and containment efforts.
Let’s get into these:
1. Don’t sell investments out of fear
If you’ve been following the news, you would’ve seen that the stock market has dropped like a rock and continues spiraling. But one thing you should not do is sell your stocks or stock-based investments out of panic.
The goal of investing is to buy low and sell high. When you’re panic selling, you’re doing precisely the opposite. Stay invested for the long run.
2. A great model for your monthly budget is the 50/30/20 rule
50% of your salary should go towards the things you need, 30% towards the items you want, and 20% allocated to safe investments that can be used as a corpus for large expenses. The curfew has limited our ability to go out and spend money on the things we want. It’s a great time to analyse what you need vs what you want.
3. Don’t over-buy items in preparation
It is certainly reasonable to stock up on essential items in anticipation of being isolated for a while, but you must be careful not to over-prepare. Be extra cautious not to buy things on your credit card. This may do more harm than good, and you’ll end up racking high rates of interest if you’re unable to pay your credit card bills.
4. Put some emergency plans in place
This is a good time to figure out what you’re going to do if you’re forced to stay home from work for a prolonged period of time. As a working parent, having kids home from school must be a concern for you. Talk to other parents who are stuck at home. Take turn watching the kids so you all can get work done. Contact relatives, you think might be willing to pitch in and help.
5. Take advantage of low interest rates
Interest rates have plunged due to COVID-19, and this has led to some of the lowest borrowing rates in history. Personal loans are easily available right now. If you’re thinking of getting a credit line, now is the time to do so. This is a good time to look into refinancing your mortgage. This can help you lower your monthly payment and build equity faster by putting more of your mortgage payment towards the principal balance.
6. Boost your emergency fund
It is recommended that you have three to six months’ expenses readily accessible in a savings account. It is important to have an emergency fund in times like these. Imagine if you had to take an unpaid month off of work, you’d be able to take care of yourself financially. If you don’t have a fund, now is the time to build it up.
7. Look for opportunities to cut expenses and develop a frugal mindset
If you don’t have an emergency fund or are worried about your cash flow during the outbreak, look for smart ways to cut expenses. For example, analyze your gym memberships, how many of them do you actually use? If your attendance is less than 30% a year, consider giving them up. If you own more than one car, give one up. You should easily be able to travel in Uber/Ola in most cities. Identify credit cards/online payment services that give the best cash backs and rewards and use them as a priority. Another way to cut down expenses is to change your light bulbs to cost saving LED ones. These little savings can add up to a lot.
8. Aside from cost savings, there are many ways you can increase your monthly income
You could start an online business, or take up online jobs on the weekends. There are many sites that offer online tutoring and subsequent job opportunities.
There are many ways to secure your finances during the COVID-19 pandemic. The bottom line is to remember that this too shall pass. Stay healthy and safe, wash your hands and take care of yourself.
Author bio
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at shiv@moneytap.com.
Website: https://www.moneytap.com/