To many people, the strike of the COVID-19 pandemic made them feel like their world was coming to an end. The pandemic came so suddenly and unexpectedly that the world got thrown into a state of panic. We tend to be uncertain about the coming months. Thus, the present moment, when the world is yet to recover from the pandemic, became a difficult time to make certain financial decisions.
It is normal to have some financial questions. However, I’ve come with the most frequently asked financial questions that are related to the period where social distancing, the use of face masks/shields, among others constitute the new order. Check them out!
1. COVID-19 made me unemployed. How do I survive?
The economic impact of the global pandemic forced many organizations into relieving some of the workers of their duties and responsibilities. This is to save costs and other expenses. If you are a victim of this ugly situation, you may have to check your eligibility for unemployment insurance for your state. This is one of the measures put in place by the government to cushion the effect of the global pandemic. However, due to the fact that many people were affected by the pandemic, unemployment applications tend to be on the high at the moment.
The implication of this is that you may have to exercise great patience, especially in waiting for your application to be granted. Check your unemployment application and portal regularly. If there is any provision for you to make calls, do that to push your application along. While you await the confirmation of your application, you may also have to check how you can cut down your expenses. Get rid of unnecessary expenses from your budget. Call creditors or service providers to see if they can lower your credit card’s interest rates. You may also check out job applications for which you are eligible.
2. I am financially stable but how can I safeguard my future?
To secure your financial future, it is important that you develop a good financial plan. This is because a good financial plan will keep you stable during market or economic downturns. It is important to note that your financial position is susceptible to external forces that are usually out of your control. However, with a comprehensive financial plan, you can plan for both contingencies and overvalued markets, thus putting your mind at ease. In other words, you already have clues on what you can do to overcome market volatility and future crises; likewise, you have a good plan to support the upturn of the market.
You may also consider having an investment policy statement. It serves as a roadmap to help you manage your assets. It also states your investment goals, target asset allocation, and asset location. With the help of a wealth manager, you can develop a disciplined approach to help keep your investment goals in check, irrespective of any volatility in the market. Investing is also a great choice for you if you have a steady stream of monthly income, have paid most of your consumer debt, and have an emergency fund that is fully funded.
3. Is it the right time to buy a home?
Buying a home is a long-term goal for many people. They may have to save for it for years before getting enough money to acquire it. Besides, home buying is a very big investment and financial decision. Before you decide to buy a home, it is expected that your emergency fund is in good shape. Now might be a good time to consider buying a home if you have planned well for it. This is because the hit on the economy might force some people into distressed selling of their real estate properties. You might just be lucky to get a good offer.
Alternatively, you may also take out a mortgage. During crises like this, interest rates are always low and lenders tend to show great flexibility. However, it may be a financially wrong decision to buy a home simply because interest rates are low if you never intended to buy a home prior to the strike of the pandemic. Remember that beyond buying a home, you will be looking forward to some unexpected expenses, such as home repairs, etc. and you will want to make sure you have extra funds to cater for that.
4. When will the financial market get back to normal?
It is very difficult to predict when the financial market will become stable. It is natural to panic during times of market volatility. Notwithstanding, looking back to the old times makes it possible for the globe to ride out of the waves. While nobody seems to have an edge in terms of a better model in getting out of the pandemic, there are a few indices that can help determine the proximity of an end to the bear market.
The first index revolves around the management of the virus. We may be looking towards new dawn if the curve flattens and normalcy is restored to life. Also, the market will react positively to the creation of a vaccine, even though it will take time. The disbursement of stimulus funds also creates a ray of hope and optimism. This can help the market to recover. When an effective cure is discovered, everyone returns to work and employment improves.
On the flip side, there has been a form of rebound, especially among technology and consumer companies while other companies, such as airlines and oil producers, continue to suffer. If the government fails to come up with an effective vaccine, another spike in the pandemic will further shrink the economy, thus making people lose confidence in the government and equity markets creates great disappointment.
5. How can I start saving?
This is undoubtedly a good time to start saving for the future. Before you start saving, take an inventory of your income and expenses every month. Identify the expenses without which you cannot live. These may include rent/mortgage, utilities, and daycare/child care. Deduct these expenses from your monthly income and decide the amount that can be automatically put into a saving account. It is after this that you can spend on other things. Ideally, the amount you should aim to save may range between 10%-20% of your gross income.
If you start with as low as $2 per day, for instance, it might seem insignificant. However, the power of compounded savings will leave you surprised at how much you would have after about three months.
There is no doubt that the crisis the globe is currently experience constitutes a part of the tough times many nations will always face. However, with the knowledge of how nations have survived global recession, we are left with enough confidence that financial recoveries are certain. Even with this hope, it is important for us to avoid making wrong financial decisions that we tend to regret in a few years’ time.
Even if you may have to get yourself a financial coach to help you make financial decisions that align with your goals, you shouldn’t hesitate to do that. We sincerely hope that some of the questions that you may be seeking answer to have been answered here.
Check out the FREE video series on my 3 Keys to Unlocking Your Financial Freedom! This video series touches on Budgets, Tackling Debt, and Ways to Increase Income TODAY! I created this series for those of you who have been hit hard by COVID-19. I want you to know there is nothing you can’t accomplish and creating a plan of action is always a great starting point.