Since the pandemic broke out, you’ve probably seen posts about solidarity on social media during the coronavirus quarantine. While we might all be in the same proverbial sea, it’s pretty clear that we’re not all in the same boat during this crisis.
Some folks have lost their jobs, investments, and loved ones, some are adapting to a “new normal” of telework, and others may see an unprecedented boom in business as demand for certain sectors skyrockets. Wherever you find yourself on this spectrum of economic realities, it’s important to take a step back and think about how you need to manage your money during the coronavirus quarantine.
To get you thinking, we’ll discuss three areas that are always key to your financial fitness: budgeting, saving, and investing 一 and some special considerations for this coronavirus quarantine. Thinking long-term during times like this can be stressful, so we hope our ideas can help ease you into planning.
Budgeting during coronavirus quarantine
Almost everyone’s financial situation has changed as a result of the pandemic. First things first, figure out what you’ve got to work with. It’s always anxiety-provoking to sit down and take an honest look at your financial situation individually or as a family, but this is a crucial step.
If you’re not clear about your debts, spending, and needs, it is impossible to create a plan to keep yourself well during the coronavirus quarantine. During non-crisis times, the 50-20-30 budget plan is a great strategy for many folks to start managing their money better. However, for now, it may be important to adjust how much money you put towards non-essentials or other categories.
Here are a few other special budgeting considerations for the coronavirus quarantine:
If you haven’t been laid off or lost your job, what is the likelihood that your income and hours will remain stable throughout the duration of the coronavirus quarantine? Are unemployment or other benefits available to you? Does your company offer severance packages?
While financial discussions make most of us uncomfortable, it’s important to have frank discussions with your employer about your job stability. Consider asking your employer for regular updates regarding the financial health of your company and your particular position.
If you’re worried about the conversation being awkward, consider calling on your colleagues for support in asking for a meeting with your supervisor. During the meeting, you can also ask for regular updates (every two weeks or so, for example) to make sure that you are always in the loop.
Since the coronavirus quarantine is affecting the global economy so strongly, it’s unlikely that your family and loved ones will not be touched by job loss in some way. If that happens, you may end up with more dependents than you’re used to. Having regular, honest discussions with your loved ones to understand their financial situations is important.
Come up with a contingency plan to manage unemployment and delays in receiving financial aid packages. It’s crucial to understand how much you can realistically contribute to supporting others without putting yourself in danger. This can help you identify gaps where you may need the support of local government, organizations, or others to meet the needs of your loved ones.
Cost of living
Expect changes in cost of living. If you’re spending more time at home, chances are your utility bills could increase. If you start ordering grocery delivery rather than going yourself, you may need to change your food budget. Perhaps you can save on transportation costs by walking to the market instead of getting a taxi.
Don’t forget to include a new budget for buying face masks, sanitizer, and cleaning supplies recommended by the World Health Organization and the Center for Disease Control. To create a realistic budget for the coronavirus quarantine, it’s important to take these changes into account.
Seek help before it’s an emergency
Globally, most people will not be able to meet all of their basic needs. If you budget and can foresee that you or your loved ones are going to fall short financially and will not be able to afford food, shelter, medication, etc., seek help before you find yourself in an emergency situation.
Consider contacting charitable organizations, your church or local school district, local government officials, coronavirus relief initiatives, and friends or family.
Manage your saving
During the coronavirus quarantine, many people around the world have been put into emergency situations, since they can no longer afford basic necessities because of job loss. But remember, saving and investing are not luxuries for the wealthy, even now. How does saving work in a time like this?
Reduce unnecessary spending
It goes without saying that, during the coronavirus quarantine, it’s important to cut back. Eliminate unnecessary spending on entertainment, groceries, clothes, and other goods.
Start by reviewing your monthly subscriptions and cancel anything that isn’t necessary. If you have cable TV, maybe Netflix isn’t necessary. Since you won’t be leaving the house anyway, maybe you can pause your Spotify Premium and gym subscriptions.
If you have extra time on your hands, you can save money on groceries by cutting out ready-made meals and buying essential ingredients instead. You can stretch your grocery budget further by buying fresh foods and staples rather than pre-packaged snacks. Reducing your intake of expensive junk foods can even help reduce your stress.
Save what you’re saving
You probably no longer need to spend money on transportation, on-the-go lunches, and the other things that normally facilitate your busy lifestyle. Instead of spending that money on other things, save it. If your transportation budget has suddenly dropped from $100 per month to $10, squirrel that extra monthly $90 away into your emergency fund rather than online shopping.
Try to preserve your emergency fund
We certainly are living in a global emergency. However, try to keep your emergency fund intact. Don’t give in to the temptation to squander your fund on creature comforts during this time. If possible, don’t touch your emergency fund until it’s really necessary 一 until you’re facing catastrophic illness, job loss, or a home emergency.
Coronavirus quarantine and investing
Aside from DIY hair-dying tutorials and bread baking recipes, chances are that your social media feed has probably been flooded with rookie investing advice. How can you sift through bad and good tips at times like this?
Remember that there is always risk involved in investing. This is even more true now. We are almost certainly headed towards a global recession if not depression following the coronavirus quarantine. Does this mean you should stop investing? Not necessarily.
During uncertain times like this, diversification is really important. While some folks may recommend investing in stocks that have lost a lot of value recently or that seem like they stand to grow in value, no one can be sure how the stock market will react to this unprecedented event.
Diversifying your portfolio with various asset classes and different types of stocks can help you lower your risk and improve your long-term returns.
If you have extra time on your hands during the coronavirus quarantine, take this time to delve into our Academy financial education library to learn about simple tips for smart investing that apply even during times of crisis and to learn about investment opportunities that you may not have previously considered.
Cultivate a long-term mindset
Especially in today’s volatile market, long-term thinking is key to being a smart investor. Long-term investing can have tax benefits, can be built up gradually over time, and is generally more stable.
While you may experience dips and peaks over the short term, generally long-term investment results in gains because long-term investments tend to yield greater returns despite short-term (gut-wrenching) volatility.
Managing your money well is one of the many challenges that we face during the coronavirus quarantine. For more ideas on how to keep your financial fitness in check during these difficult times, review the Academy financial education library.