The Covid-19 commonly known as corona virus has officially been termed a pandemic by WHO and Kenya is now part of the 120 countries affected by the virus. On Friday 6th March the first case was confirmed and in just two days, two more cases have been confirmed and this may be a start of a very bumpy ride ahead. So are you financially prepared? Two days in and most sectors are experiencing slow economic activity with directives made for some sectors to significantly close. And these may become worse with time should there be a rapid increase of new cases being reported. Below are a few ways we can prepare financially if the virus persists.
Stay Calm – Panic is the start of all wrong decision making. When we entertain worry, uncertainty and fear, we let those emotions drive our decisions and in most cases, emotional money decisions are always the wrong decisions that we always regret later. So, take a step back and make well thought-out money decisions. Do not let the uncertainty around you and the actions of others dictate your money decisions. Educate yourself on how the to keep yourself safe, and how the virus may affect you financially. Are you at a higher chance of getting the virus? E.g. you take public transport every day. Does your insurance cover the infection or will you have to pay out of pocket? (Do realize if the virus becomes full blown we may not all be able to be treated in the public hospitals.) Does your employer offer paid sick leave? How long will you be out of work in case you contract the virus? Will you be able to survive? How about your family members? Are you in a position to financially meet there needs in case you are infected or they are infected? These are just but a few things to consider. Take time to make a plan that best suits your situation taking into consideration these different scenarios and use it to guide your money decisions moving forward.
Stock your Emergency Fund – It is sad that most of us do not have an Emergency Fund as this is when emergency funds become useful. If you do not have or your emergency fund is quite low, now would be a good time to beef up as much cash as you can until you are comfortably able to absorb the effects of the crisis. As more and more sectors are shutting down to reduce the exposure to the virus, the more we may need to dip into our reserves especially for those in sectors that are directly affected by the virus. So before the situation becomes worse, start beefing your emergency fund. You can set a direct standing order from your next salary/profits you get to go directly to your savings. Send any extra income you may get to your emergency fund. Hold off on your investing in the meantime and transfer those funds to your emergency fund. Another idea would be to look at anything you can sell online or consider a side-hustle to acquire more income.
Prioritize your Spending – This is not the time to frivolously spend but a time to reduce our spending significantly. A time to prioritize our spending. Try limit your spending to necessities as we do not know how long this pandemic will be here with us. It has been almost three months since the first case was reported in China, Wuhan and it has only gotten worse by the day with most countries having a shutdown to try reduce the spread which has negatively affected the economy. And Kenya has not been left behind, in only two days, schools have been closed, the judiciary has significantly reduced its operations, people have been asked to use public transport only on a need basis etc. Can you imagine how many people’s sources of income have been affected by these directives? Do remember, the longer companies cannot operate at optimum the more at risk we are to losing our sources of income. So for every purchase you make, start by asking yourself if it’s a need or a want. Stick with needs only and push that extra money to your emergency fund. You may need that extra cash sooner than you expect.
Pay Minimums on your Debt – Even though we are in a pandemic do not forget about your debt obligations. Set money aside to pay your minimum payments to ensure you do not incur late fees and penalties. It is also advisable if your emergency fund is not huge enough to transfer the extra payments/ over-payments you would normally make to your emergency fund. Once the storm has passed you can easily resume making your extra payments. For those who will lose their jobs or receive a significant pay cut due to the virus, it is important to get in touch with your lenders and explain your situation and request for a grace period. You will be surprised at how lenders are understanding in such situations. However, do not stay silent and assume your lender will miraculously know you were significantly affected by the virus.
Live Below your Means – I cannot emphasize this enough. During such a pandemic, it is a time to live not just within your means but below your means. Living within your means will mean utilizing every shilling you make hence you will be exposed in case your income reduces or is cut. However living below your means will enable you build up on your emergency savings which may come handy in the future if the pandemic persists. Do note that living above your means will lead you to taking debt to finance that lifestyle and this is not the time to take up more debt as the chances of being unable to service that debt is quite high. With the economy taking a hit chances are making more money will become difficult with time, even the companies that are known of doing so well will take a hit. So don’t be over confident that your sector/company won’t be affected, make a budget and stick to it. The expensive outings, travels, or other non-necessities just to look rich are no longer important. Trust me, you don’t want to receive a pay cut or worse, be retrenched with a huge pile of debt you could have avoided if only you lived below your means.
We all need to start preparing!
PS: None of the content in this blog is financial or investment advice. It’s for educational purposes only. Please do your own research and/or consult with a professional if you want advice customized to your specific situation.