When a global pandemic like COVID-19 strikes, the world can be affected in a multitude of ways.
With the economy taking a hit, a reduced workforce and mandatory quarantines, finances can be strained.
As such, it is now more important than ever to establish a financial plan in order to safeguard yourself and family against these unprecedented times.
What is a Financial Plan?
A sound financial plan identifies funds that you spend, save and invest. It paints a picture of your financial history. This identifies what financial habits need to be cultivated, in terms of, should saving be increased and spending decreased? Should I continue to invest in my current portfolio, depending on the interest or dividends I am receiving? By understanding your financial history, you can establish a clear-cut plan for future improvement.
A financial plan also takes into account your present financial situation. It details what your current incoming revenues are – from your job, business or government assistance. The plan also highlights your expenses. How much do you spend on essential items vs. luxury items? What are your short-term and long-term debts that you have to pay?
Do you see yourself as being one paycheck away from bankruptcy? Be realistic and evaluate your current financial standing to accurately determine which areas are to be maintained or modified.
Finally, a proper financial plan identifies goals and what your ideal financial future looks like. What future goals can you set out and achieve in order to generate more revenue to improve your financial situation and reach the level of financial stability or independence you want?
Your financial plan should periodically be revised and updated. Economies, legislations and budgets are subjected to change depending on global circumstances. Therefore, your financial plan should be flexible to accommodate these changes and still outline a clear plan of action for you.
How to Manage Your Finances During this Pandemic?
Several actionable steps can ensure financial stability within your livelihood is preserved.
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Have pertinent knowledge
An effective financial plan depends on pertinent information where you can assess your revenue vs. expenses and identify areas to reduce spending. Knowledge of your financial standing will ultimately determine what decisions are to be made.
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Who are your debtors and creditors?
You may have been anticipating on receiving funds for an important purpose. You will therefore need to determine, if and when you are likely to do so. This information will help you to budget your own revenues and expenses.
Likewise, it is essential to list your creditors. You may have to request payment extensions or update them on your situation, so as to possibly establish a new payment arrangement and maintain a cordial relationship.
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Apply for assistance
If you are temporarily out of work, you must find a way to supplement your income. If this scenario applies to you, you should apply for government assistance promptly. Salary grants, loan extensions and bill deferrals are currently available for individuals who may have lost a substantial part of their regular income.
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Revise your budget
It is very likely that certain changes – cutbacks and spending reductions may have to take place. As such, be realistic and adjust your budget accordingly. Essential living items such as food, toiletries and sanitization products may have to be temporarily at the top of your list.
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Educate yourself financially
Many people spell doom and gloom during times like this. However, nothing lasts forever and in every dark cloud there is a silver lining. Given the financial adjustments that have to be made, there is no better time to increase your level of financial literacy. Not only will financial education enable you to understand key economical concepts surrounding this pandemic, but you will find yourself to be in a much more prepared position should this occur again.
Use this time as an opportunity to get better acquainted with the stock market, saving, budgeting, investing and other financial trends to acquire pertinent knowledge on protecting yourself and capitalizing when the good times return.
Tips for Rational Financial Decisions.
Whether you’re in middle management, a student or at the beginning you’re your career, we all have to make financial decisions in terms of how we budget ourselves. These decision are critical for an effective financial plan. Important tips to consider are:
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Do your research
Ensure you source accurate and relevant data from trustworthy news sources, stock reports, press releases, online articles and videos. The more informed you are, the wiser your decision making can be.
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Get sound advice
Whether you’re a seasoned investor or just starting, seek accurate advice from a financial advisor or professional to help you navigate the turbulent economic climate.
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Weight your options carefully
Utilise the research and advice you gather to weigh your options carefully. Your financial decisions should not be made in haste. Go over carefully the numbers and identify which options will be most feasible for yourself or loved ones at this time.
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Think long-term
Very often during a crisis, we set our sights on the short-term because we want it to be over as quickly as possible. However, have a strategic plan for the long-term helps you to avoid uncertainty and see the bigger picture. During this time, the more preparation you can put in place, the better.
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Be realistic
We all want this pandemic to go away as soon as possible, but it is important to understand, this may not be the case in every country. There is no certain evidence as to when things will go back to how we knew it. Some countries will take longer to re-open. Some industries will take longer than others to restart again. Optimism is fine, however, it is important to be realistic when it comes to financial planning because everything is deeply rooted in facts and figures.
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Don’t panic
Rational decisions, particularly financial ones ought not to be made in panic mode. Panic usually distorts the mind of rational judgment and hampers logic and reason. Therefore, rest assured that challenging times do not last forever. Keep your thinking level-headed, be suitably optimistic and prevent stress or fear from causing you to think or act irrationally.
