Pandemic financial survival guide
By Pauline Muindi | April 18th 2020
The coronavirus pandemic has changed the way most of us think about our health, work, parenting and leisure. As the virus continues to ravage the world, there have been concerns on how it will have long term impact on the economy.
While a total lockdown hasn’t been announced in Kenya, many businesses have been closed and many more have slowed down. You might be uncertain about your job or have a decreased income after a pay cut or because you lost a side hustle.
How well you come out of this pandemic, in terms of finances, hinges on your planning. Here are a few tips on how to survive the pandemic:
With reports of the pandemic spreading every day, it is easy to panic. You are probably worried about your long term financial goals such as retirement, your children’s education, and investing. If you haven’t been saving for such long term goals, this pandemic should serve as a reminder that you should always plan ahead.
This is also the time to learn the use of an emergency fund. If you have any, whether it is for three or six month’s income, it might be enough to help you. It is important to remember that this pandemic won’t last forever.
Maximise liquid savings
In a crisis, cash accounts such as checking, savings and money market, as well as certificates of deposit are the most useful. You can withdraw money from them at any time without incurring a loss.
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Unlike stocks, the value of these resources doesn’t fluctuate with market conditions. Additionally, unlike with retirement funds, you won’t face early withdrawal penalties when you withdraw your money. However, you might be required to forfeit some of the interest you’ve gained on certificates of deposit if you close them early.
Note: In good times, before a crisis strikes, you should aim to have at least three months’ worth of expenses saved in liquid accounts as your emergency fund.
Create a crisis budget
With the changing situation, there is need to adjust your budget accordingly. Take a close look at how much money you are making and spending. If you have to take a pay cut because of the pandemic or lose your job, you will have to change your budget to suit your new reality. Which expenses are unnecessary? Which bills can wait a little longer?
Your crisis budget should eliminate any non-essential spending. Ensure that you’re only spending on essentials like food, shelter and transportation. Once you know how much you need for them, it can help you to stop panicking because you know exactly how much you need to cut back on and for how long your savings will last.
To create your crisis budget, you can download budgeting apps such as Mint or YNAB, download budgeting spreadsheets online, or use pen and paper.
Track exactly how much you’re spending and on what so you can make the right decisions.
Find a remote job
If you’re working from home, you are on leave or you have lost your job, you might find yourself with time to spare. Instead of watching TV all day, you can use this time to look for a remote gig online.
Skills such as writing, editing, video and photo editing, graphic design and proof-reading have a huge demand online. If you have the right skills, you might also want to look for part-time jobs as a virtual assistant. To find remote jobs in Kenya, check job boards such as Kuhustle, FlexJobs, SolidGigs, Remotive, Angel List and so on.
Before applying for remote jobs, carefully craft your resume to fit the job description. Who knows, you might end up with such a great remote job that you quit your current one.
Communicate with creditors
Nobody knows how long the pandemic will last. This means that you can’t be sure if your emergency fund is sufficient to carry you through the rough patch. This is definitely not the time to focus on paying off debts.
Contact all of your creditors regarding your situation. In the light of the economic impact of the pandemic, your creditors might be willing to work out an easier repayment plan or postpone payments.
Don’t focus on paying debts to the extent that you have difficulties in paying for the essentials.
Keep up with routine maintenance
If you aren’t keen on routine maintenance of your home, car and household appliances, minor problems can easily spiral into costly repairs. In times of crisis, where every shilling counts, ensure that you are on top of routine maintenance.
The same principle also applies to your health. Don’t use the excuse that you are spending more time indoors to binge on unhealthy foods and fail to exercise. Eat healthy food, have a regular home workout routine, and take care of your mental health. Remember that you are likely to have better outcomes if you’re healthy.
Plan for sickness
Despite the safety precautions such as frequent hand-washing, social distancing and self-quarantine, you (or a dependant) might still get infected with the virus. You have to include this possibility in your financial plans, to ensure that the period is as financially smooth as possible.
Check with your employer if you will get paid sick or family leave if this happens. This is also a great time to review your company benefits. If you are unsure about anything, contact your HR office to get clarification.
Because Covid-19 isn’t covered by medical insurance, if possible, it is also a good idea to set aside some funds for hospital bills and related expenses.
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