Managing Your Finances During the COVID19 Pandemic
We are currently facing a pandemic that has not only impacted our lives, but also businesses, the economy, and the world at large. The Coronavirus pandemic has become a global issue with no prior warning as the entire world was caught unaware hence, the lack of proper planning for the impact. This suddenness has taken a huge toll on our daily activities and lives in general. People reacted differently to the COVID- 19, especially because of the uncertainty as to when things will get back to normal, there is a range of emotions from fear, panic buying, job retrenchment, pay cut and other issues.
How can you manage your finances during a crisis like COVID- 19?
I have outlined a few ideas;
Evaluate Your Financial Health: What you should do first, is to analyze your assets and liabilities to ascertain your net worth. Net worth is basically really everything you own that is of significance (your assets) minus what you owe in debts (your liabilities), which can be positive or negative. Assets mean what you own that can enable economic benefit (Inflow) to flow to the entity/ person examples include Cash, buildings, land. Liabilities are what you owe on those assets — including car loans, your mortgage, and amounts payable.
For you to effectively manage and monitor your finances then you need to create a monthly budget which is recommended or a weekly budget, whichever suits you). The budget will help track expenses and ensure that projected expenses are not above expected income. At this point, you should re-evaluate your budget tossing out unnecessary spending.
Understand the Differences between Wants and Needs: Before you spend, especially during an emergency of this type, in a pandemic, ensure that it is absolutely necessary. It is best to know what to prioritize, such as your needs, and make sure to avoid the wants that are not necessary. Basically your needs are essential to you and your wants are not to be prioritized at this phase. The 2 by 2 matrix below sheds more light on needs and wants.
Build your income streams by diversifying investments, this is not the time to sell off assets-avoid panic selling. Find profitable ventures while considering their risks and authenticity. The best form of investment is self-investment and also leverage on long and short investment options like cash and cash equivalents, money market, Eurobonds, mutual funds. We need investments so we can have a soft landing after the pandemic, to hedge against currency risk and to save for rainy days.
Please hold cash, basic secondary economics classes taught us that people should hold cash for three (3) major reasons; Precautionary motive to meet uncertainties or emergencies, Speculative motive which I like to call exploring advantageous opportunities and when cash is held to meet day to day activity then it is called Transactional motive. In a nutshell, it is important to hold cash so as to cover unforeseen expenses, meet short term obligations, and take advantage of a juicy investment option.
We should all learn from experiences like this and plan adequately for unforeseen circumstances, whether you experienced a change in your finances or not, it is important to assess your financial resources and plan to ensure financial success.
This is a phase that will pass. Change, they say, is constant, so this phase will pass. Stay safe.
Connected Development in partnership with ONE Campaign and The League of Progressive Ambassadors of Nigeria (LEPAN) organized...