The coronavirus outbreak has affected humans in many ways. The COVID-19 pandemic has brought with it not only a health crisis but also a situation that impacts society, life, economy, and the future of the world. However, there is a bright side to everything, and people have a lot to learn from their current circumstances. These testing times are sure to make people immune, robust, and proactive in all the aspects mentioned above. Financial management is no exception in this case. Small businesses, start-ups, leading companies, and even individual investors are immensely concerned about their economic future and what it will take to navigate through this turmoil.
If you are sailing in the same boat, here are some key inputs from financial advisors to help you steer through this disruptive situation.
1. Go with the flow: Don’t stop saving
To ensure that your financial security stays intact and is minimally affected by the traces of the COVID-19 pandemic, you must keep the flow of your savings running. Putting a stop to your savings and investments and stocking liquid money might not be the answer to the present situation. There is a fundamental difference between thinking about the future and living in it. While planning for it is essential, living in it may bring up unnecessary fear and stress. If you stop investing out of the fear of market volatility, it may cultivate the anxiety of lagging behind. At the end of the day, your money will be stagnant. Taking professional guidance from financial advisors can help you narrow down on instruments that can be ideal in a situation like the present.
2. Maintaining liquidity: Keep cash available
Though this point may seem contrasting to the previous one, what needs to be understood here is that you must keep some liquid cash available for unexpected expenses. A financial advisor can help you chart a plan and secure a percentage of your earnings that you must keep with you in case an emergency strikes. This will not only boost your confidence, but it will also enable you to strategically manage your money as and when you require it, rather than taking it out all at once or being dependent on credit cards.
3. Do not panic: The situation is not all blue
The news headlines and discussions are sure to make you feel gloomy, but the situation is not that bad. The world is suffering through a global health crisis, but the financial markets are not in a complete pitfall. The best example to consider at this time is the 2008 global recession, which did not stop the world economy from growing. The present situation is not a recession, and strategic moves and planning can be deployed to deal with it for a common profit. Investors who kept their investing principles in place and made balanced investments as per their financial planners’ advice are still confident about their money and undisturbed by the current financial situation.
4. Prepare in advance: Setup your emergency fund
One of the most crucial things to do in these circumstances and also as a part of a robust financial plan is to set up an emergency fund that caters to your needs and those of your family. Every financial advisor would recommend setting aside a pool of liquid funds that can be used at any given time. In the wake of the current situation, many people have suffered from several layoffs and pay cuts. In the absence of a stable source of income, an emergency fund can help you cover rent, loan installments, insurance premiums, and contributions to your retirement funds.
Ideally, your emergency fund must contain enough funds that can sustain your expenses for at least 6 – 8 months. However, the precise figure can differ for every individual. It helps to draw an outline of all probable expenses or emergencies that can arise in the future. Talking to a financial advisor can also aid in ascertaining the ideal amount. People who are well-prepared for any adversity can comfortably steer out of this global crisis.
5. Look ahead: Set long term goals
The current market situation is not ideal. But it is also not going to stay the same forever. As per the general rules of investment, markets work in cycles of bull and bear phases. The bearish phase can be attributed to several reasons, like a market crash, change in government reforms, the rise of other sectors, etc. Another factor that can lead to a temporary crisis is a global pandemic like the COVID-19. Though this crisis is sure to end, the distress it causes will be hard to ignore. However, a bull phase is sure to come after a bearish period, which is why it is essential to look at the bigger picture and set long term targets.
You can start by checking if your existing investments align with your goals. Now is the time to review your investment portfolio and make sure that a balance is maintained to overcome any losses that you may have suffered during the pandemic. Moreover, since the markets are low, this is a good time to implement value investing and buying the stocks you have been tracking for some time. Seeking advice from financial advisers at this stage can be of great help as they can guide you towards a more balanced and profitable portfolio.
6. Avoid debts: Save and invest
Lastly, the best piece of advice every financial advisor would share with you now is to avoid all forms of debt. If you had planned to buy a new car or home before the coronavirus outbreak, keep them on hold for some more time. Try to avoid big expenditures, unless absolutely necessary. Do not buy things on credit cards or use any other line of credit. Instead, save your money for a future contingency or invest it to create more wealth.
To sum it up
The world is presently going through a situation that has left everyone in distress. The only way to move ahead is by planning rationally and not letting panic get in the way. Financial decisions need extra attention and caution. It can be extremely beneficial to seek expert advice from a financial planner right now to ensure that your money is safe and on the path of growth.