Managing your finances in this time of pandemic
Times of crisis like the current pandemic can bring uncertainty for many reasons, especially for Filipinos who are living paycheck-to-paycheck. Almost everyone experienced a change in their financial situation. That’s why it’s very important to review where we are right now and plan ahead to ensure financial success, both now and in the future.
Part of my work as a Financial Adviser is to help you manage your current finances, identify risks, and setup a master-plan for your future goals. Here are some pointers which I made and personally implementing in my personal finances that could also help you keep things in order amid this pandemic:
1. Review your current financial situation
What financial assets do you have? How much do you owe? Are you able to keep your job and your wage? Is your work/company/business stable enough to support you for the next coming months? Do you foresee any possible dip in income that would affect you financially? Have you saved for an emergency fund before this pandemic? Have you secured any medical or life protection instrument for you and your family? Can your business still operate following the restrictions and guidelines imposed by the government?
It’s very important to be aware of your current standing so you can identify future risks and create action plans in response. This helps you control your current assets and liabilities, discourage procrastination, define other income opportunities, determine whether there are assets which you can use as an alternative to meet family obligations and promote fortitude even at this time of uncertainty.
2. Make adjustments on your budget
If you don’t have a budget plan, now is a good time to put one together. If you’re facing a significant reduction in income due to the pandemic, track your expenses carefully. List down your cash inflows and cash outflows — what goes in and what goes out of your wallet/bank. Since raising cash inflows may be a challenge because of the irregularities in our economy, consider reviewing your cash outflows and see if you can pare it down and reduce your expenses further.
3. Save and spend wisely
If you still have an income, save what you can. In terms of priority, finances should be devoted first to the fulfillment of essential needs, such as food/drinking water, shelter, utilities, personal hygiene, sanitary/safety items, transportation, and health/life protection. We need to stop bad habits in spending. We need to be more conscious of the difference between needs and wants. Cutting back on certain expenses altogether might not be an ideal situation, but if it means staying financially afloat during this crisis. Then by all means, save, save, and save!
4. Manage your debts/bills
Identify your outstanding debts/bills and prioritize which to settle first and which you can contact your creditor for a possible credit adjustment. For me, utility bills should be highly prioritized as this will be your support while staying and working at home. Managing your credit card debt little by little can also help you avoid penalties and interest that can add burden to your current financial standing. If you are a self-employed individual, please do not forget about your health and pension contributions (PhilHealth and SSS) as this will be very vital to your day-to-day protection and future retirement. For other debts, this is not the time to shy away in contacting your creditors/landlords. Some programs are already in place to help extend due dates, offer deferment, discounts or stop evictions/foreclosures. These are unprecedented times, and everyone is affected by the current pandemic. Large lending companies and local creditors are not exempted from it. Most of them are willing to impose flexibility to help reduce the burden for their clients.
5. Build an emergency fund
Advisors would commonly tell you to build an emergency fund equivalent to at least six months to one year of your monthly lifestyle spending. But for those who are living paycheck-to-paycheck, or those who were affected by workplace closures or wage cuts, this would be very hard to execute. The good news is, you can always start small and start when everything settles. Also, since you’ll be reducing your usual expenses while at home, you can add what you can to supplement your emergency budget to help you cover the next months’ expenses. For the people who are living paycheck-to-paycheck, it will always be beneficial to find new sources of income, like applying for a part-time work on your off hours. With this strategy, you can increase your cash inflows and create enough resources for an emergency fund. If you own a credit card, you can treat this instrument as an emergency tool as well.
No amount is too big or too small to make a difference for you and your family. The important thing is, you are giving value to the future which promotes discipline and you have a financial fallback which is very critical in this time of uncertainty.
6. Review your Health and Life Insurance Policy
Most would think that this is just an additional expense, but the health/life risk this current crisis is suggesting would say otherwise. We all know how contagious this virus is and it affects all walks of life — from rich to poor, young to old, and healthy to frail. We cannot afford to hold back and be complacent. We cannot afford to further burden our savings because of not preparing ahead. If you currently have a life protection, check its adequacy. It should be enough to cover possible future developments like sickness and death. It should also take into account both family size and projected family lifestyle. You can also check with your insurer if they are providing payment extensions and additional protection benefits. If you haven’t secured a health or life protection, add this on to your list of priorities to help you generate future resources and follow a strict time frame for you to start the soonest. As your adviser, I can help you identify available resources in your overall budget and create a time table by building a master-plan. I can also recommend some products which can help you answer these needs one at a time. An example would be prepaid health cards which are now available in the market. These can secure your emergency hospitalization needs for as little as P700. Bottom line is, no one is safe from this pandemic. But there are available systems to manage life risks. Your own life is your most important asset; don’t let this fall below on your list of priorities.
7. Pivot your business or stop the bleeding
Being an entrepreneur myself, I know the feeling of navigating a business in this time of pandemic. If you are a business owner, this is the perfect time to pivot your business. Most are investing in digitization which helps businesses reach their clients even at the comfort of their homes. Some have pivoted in a drastic fashion by using their current machinery/equipment in producing new essential products which help fill market demand for protective equipment and sanitary materials. The key is to understand the potential of each alternative, and see if you can direct your business in the short-term. But still, there is a reality of you reaching the end of the rope for your business. Unfortunately, some industries were affected directly. If your business is directly affected and all means of adjustment would not be viable, swift action would be the key to stop further bleeding. Contact your accountant and discuss your remaining assets and obligations. Reach out to your landlord for possible adjustments in your rent, contact your suppliers for possible refunds and liquidate your assets the soonest.
8. Create a Financial Recovery Plan
This pandemic is teaching us to be disciplined with our finances and to anticipate future emergencies such as what we are currently experiencing. When things settle, find time to create a recovery plan for you and your family so that you can be prepared in handling future emergencies that may arise. Commit to regular savings, remove bad spending habits, manage your debts early, rebuild your emergency fund and prioritize health and life protection. Start gradually and create a financial plan to handle future emergencies, manage risks and create a better future for your family.
It’s difficult to predict when this crisis would end, but it wouldn’t hurt to practice optimism. Being optimistic means looking into that tiny glimmer of light at the end of the tunnel, and making an effort to reach it while accepting hardships along the way. As the old saying goes, “tough times don’t last, tough people do. With the help of financial planning, I’m positive that we can increase our chances of success even in this world of uncertainty. While I’m aware that there is no “one-size-fits-all” solution when it comes to personal finance, I hope this little sharing of mine would inspire a few individuals to come up with solutions tailor-fitted to their own individual needs.
