Who pissed off 2020? Seriously, I wanna know, because somehow we’re stuck in a revolving door of complete and utter confusion, rendered unable to talk about anything but the Coronavirus. Brunch chat, dinner gossip, pillow talk, morning mumbles – you name it, we can’t seem to stop ourselves tying every single conversation to the virus. So naturally, here I am doing exactly that. As they say, everything is content.
It’s a weird and scary time, especially as an expat, and especially in Australia. With the economy heading south, I’m reminded of that weird old time we called the Credit Crunch, but Australians managed to get through the GFC relatively unscathed. The unfamiliarity with the realities of a recession means Australia’s future is even more uncertain.
But if the Coronavirus can teach us anything, it’s some solid financial lessons. Health and financial security are two of our most important necessities at times like this. So, once you’ve made sure you’ve got enough loo roll and pasta, take a second to absorb these worthwhile money lessons we can learn from the COVID-19 outbreak that’ll go down in history.
1. An emergency fund is critical
The long term impact the Coronavirus will have on the economy is unknown, but if we’re thinking worst case scenario, we could be looking at lost jobs and a very real recession. If supply chains are disrupted or pandemic panic continues, people will stop spending, businesses may be forced to close, and some industries/sectors may be forced to let people go.
Having an emergency fund is often associated with more personal crises like getting diagnosed with a long term illness, or getting made redundant because of a company-level issue. I doubt many of us had a global pandemic pegged as the trigger for our emergency fund. Having 3-6 months worth of expenses saved can relieve some of the stress you may experience in terms of the economy, and can allow you to act more rationally and waste less energy on worrying about your income.
2. Be financially able to respond
Another important factor is that not-quite-emergency fund, but funds that you can happily use to financially respond to problems. Things like perhaps needing to stock up on 2 weeks worth of food for potential isolation measures, grab an extra pack of loo roll for your friend who can’t get any, or maybe even pay extra if prices are pushed up.
If international supply chains become affected, we may need to rely more on production within Australia (or your own country), which could mean higher prices. How would you respond if loo roll doubled in price? Having access to funds can help you respond in these situations, and even have some surplus to help others in need. Being financially comfortable also allows you to continue to allocate spending with local businesses and keep money flowing through the economy.
3. Take opportunities
January was a really busy month for me from a freelance and blogging perspective – and I’m really glad I maxed myself out and took all the opportunities that came my way, because I wouldn’t be surprised if income slows down for the next few months.
The Coronavirus outbreak is a reminder to try your absolute best to take financial opportunities when they come to you, whether that’s through work or a business you operate. It’s easy to get complacent in assuming that we can turn things down when the timing isn’t absolutely perfect, but sometimes, the unexpected happens and we’ll wish we’d jumped on it when we had the chance.
Of course, prioritise your mental and physical health when deciding which opportunities to take, but if you can squeeze an extra drop of energy out to seize it, you might thank yourself later.
4. Be careful of locked-in payments
Committing to regular payments, either on a loan, lease, subscription or membership can prove problematic during times of economic uncertainty. Whenever you make the decision to take on a regular payment, ask yourself how confident you are that you could service that payment if your income stopped – is it built into your emergency fund? If not, change that.
Oftentimes, we’ll take out car loans or leases, sign up to expensive gyms (guilty), or commit to ongoing subscriptions, because when we’re earning, we can easily justify the payment. But how would we respond if our income was affected?
I’ve had to swallow the fact that my 3 month minimum lock-in contract for reformer pilates may render me $64 a week out of pocket with nothing in return if I’m unable to attend classes due to isolation measures. It was a risk I considered upon making the decision to join, and while I can service the payment with my emergency fund, it’s still an annoyance that’s on my mind.
5. Know your investment strategy
Pandemic psychology proves that when one person panics, more people panic, and then more people panic when they see those people panicking.
When it comes to investments, media hype can have us freaking the eff out about the fact values are plummeting. If you invest, know your strategy and stick to it, even in times of uncertainty. Pulling your money out of investments as soon as the market dips is how people lose money in the stock market.
Make sure you’re only using surplus income that you could live without if the market crashed tomorrow, and don’t ever sacrifice your emergency fund to get in on the investment game. If you deplete your savings, consider terminating your investments until you’ve built your savings back up. That way, you’re not reliant on the value of your investments if you need to access cash. I wrote about my investment plans during the Coronavirus outbreak, if you fancy a read.
The Coronavirus is scary for everyone, whether you’re worried about the health implications, economical implications, or both. The most important thing is to stay calm, consume media mindfully, and stay rational! Everyone has their own opinions and own ways of dealing with things, so don’t waste too much energy judging or comparing your own feelings.
Take steps to protect and prepare yourself, and learn from this experience for the future.
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