How Will the Coronavirus Effect Your Personal Finances?

Table of Contents
How Will the Coronavirus Effect Your Personal Finances?
Prioritizing Expenses

Getting Out Of Debt

Checking Insurance Policies

Managing Business

The Lowdown

With COVID-19 making headlines around the world, it is reasonable to have many questions in mind.

This stressful period has got many of us thinking because we are not only facing a health-based emergency.

That’s right. Let’s turn our attention to finance.

The pandemic has sent shockwaves through the global economy.

It is likely to continue affecting our personal finances for a while.

Without a doubt, health is the number one priority.

We should make every effort to keep ourselves and our families safe.

At the same time, maintaining our financial health is equally important.

How about creating a plan and using resources efficiently to get a solid handle on our finances?

This will prepare us for whatever lies ahead in the coming weeks and months.

Needless to say, this is easier said than done.

If we save money commuting, we might be stocking up on food and cleaning supplies or books and activity kits for our children.

Either way, money comes and goes, but we need to figure out ways to save as much as possible.

I follow the 50/30/20 budgeting rule because it is a simple and intuitive approach that keeps my income in check.

50% is what we allocate to our needs, such as groceries and mortgage.

30% goes towards wants, and for this segment, everyone’s list is different.

For me, it mostly includes ordering takeout, going to the movies, or spending on tech gadgets.

The remaining 20% is all about investing and paying for my insurance bills.

Now, my 30% is changing because I am converting expenses for visiting restaurants, getting haircuts, spending on personal care products, and outdoor events into savings.

I need a safety net, and this is one way of going about it.

Enough of myself.

Let’s discuss how we can best manage our finances, what account providers can do to help, and the available options in case we have to borrow money.

Prioritizing Expenses

At this point, many of us are holding on to the hard-earned cash, to give ourselves a sense of financial control over the situation.

The question is where we would like this money to go.

Generally, this includes handling housing and utilities, car payments, communications, and transportation first

The key is to focus on what items are the most important to us.

This shouldn’t be too hard because, in times of crisis, we do reconsider our priorities and determine the best course of action.

We must create a budget to manage the conditions imposed by the outbreak and keep track of our cash flows, so we know where we stand.

We can also stretch our grocery dollars by using apps that offer coupons, gift cards, or cash back rewards when we scan and upload our receipts after purchase.

Getting Out Of Debt

Having to address our debt obligations while facing the coronavirus cash crisis is not something any of us look forward to.

COVID-19 will stick around for a while, and we all are waiting for a vaccine with bated breath.

I hate to be the bearer of bad (or rather, obvious) news, but this will not stop creditors from demanding what’s rightfully theirs.

If we stop making payments to them, we may very well be putting ourselves on the path to financial ruin.
According to money, a study by Money and Synchrony Bank shows that only 30% of men and 41% of women in America had an emergency fund in this economic downturn.

Americans also carry consumer debt amounting to an all-time high of almost $14 trillion in the second quarter of 2019.
These figures alone are enough to cause financial distress, not to mention bringing any coronavirus-related debt into the equation.
These figures alone are enough to cause financial distress, not to mention bringing any coronavirus-related debt into the equation.

The bills won’t stop coming, and we will face some tough choices.

The trick is to approach the situation calmly and use our emergency funds only as a last resort. Remember, these are useful for periods of no income, including unemployment and missing work due to health-related reasons.

Hopefully, this will convince us to leave our emergency savings untouched for as long as possible.

We must not hesitate to contact our lenders and landlords if we live on rent. Reaching out to them as soon as it dawns on us that we will be unable to make timely payments is a smart move.

Many lenders provide proactive measures to assist borrowers struggling due to coronavirus.

Requesting loan extensions, a reduction in interest rates or any relief options they can offer for repayment is the least we can do to help ourselves.

What if we have close ties with our lenders?

If so, they may grant forbearance by waiving late fees or not informing credit reporting agencies of late payments.

Getting any forbearance or payment assistance program agreements in writing once we have explained our situation is the next step.

Better not forget checking our credit reports to see if they are accurate and reflect the agreements. For instance, if lenders agree to skip a month’s payment, ensure that they did not record it as a delinquent account or a missed payment.

Letting them know the amount we can currently afford to pay and giving a timeline for resuming regular payments is a must-do.

Both parties should be flexible and willing to compromise.

Furthermore, paying off debt with the highest interest rate first so that it does not escalate.

You can also opt for virtual consultations with financial coaches and counselors to seek advice on dealing with matters related to debt. Remember social distancing even if the matter is urgent.

Checking Insurance Policies

An article in The Washington Post reveals that over 22 million Americans have applied for unemployment grants since President Trump declared COVID-19 a national emergency.

Needless to say, the stress of unemployment alone can take a toll on our mental health.

Having a pandemic to deal with means that many of us are probably struggling to make ends meet.

Realistically, a closer look at current circumstances and the state of the international economy will reveal that jobless people are not likely to find work anytime soon.

Read More: Money Saving Ideas During Lockdown

Let’s look at another point. How we respond to stress during COVID-19 can depend on our financial circumstances, health background, social support from our loved ones, and the community we live in.

If we respond more strongly to the stress of this crisis, we become more prone to anxiety, depression, and other mental health conditions.

This leaves us unable to perform routine work, especially if we catch the coronavirus.

Here’s where insurance companies can help.
They know that these are hard times for everyone, and provide various solutions to support us through this outbreak.

Why not consider insurance plans that would cover our mortgage payments or soften the blow of potential financial loss? Some options are:

Income Protection Insurance
This offers a tax-exempt monthly income if a person is unable to work as a result of illness, accident, or a reduction in salary for a prolonged period. The insurance covers mental health conditions and allows the insured to benefit from support services.

Private Medical Insurance
This provides fast access to treatment by reducing waiting times and enabling a quick diagnosis.

It can partially or entirely pay for the necessary treatment and help us recover faster, allowing us to get back to work as soon as possible.

Managing Business

Many of us are small business owners who have been affected by the pandemic that calls for social distancing.

Business continuity is the need of the hour, and we must take proper measures to ensure that we can continue to perform core business functions during such emergency events.

We will most probably evaluate where we are currently spending money and make a list of avoidable expenses.

Taking into account the existing landscape of our markets and the world in general, it is a good idea to put minimal resources into our companies for now.

Temporarily reducing our burn rate to or near zero will allow us to assess other areas that offer more consistent revenue streams, such as freelancing.

We can also introspect on our business pursuits or study successful competitors and learn what they are doing differently. It is then possible to leverage those strategies to optimize processes in ways that meet our unique needs.

Or, we might find it convenient to offer our products or services remotely during these times when everyone is staying at home.

Adapting is the name of the game, and reaching out to our customers online is a viable option if we look at things from a long-term perspective.

Remotely working means that we will need to invest in solutions such as cloud technologies, but this decision will pay off, considering that the future of work is digital.

The Lowdown

COVID-19 is not the end of the world.

We are only adapting to a new normal, and our finances need not suffer.

Taking steps to mitigate long-term financial damage is necessary for those hit by the virus, and there is no harm in seeking professional help if we need it.