It is projected that the COVID-19 pandemic may cost the global economy over US$2.7 trillion in damages. The impact is not only limited to businesses and the government, and it will, in fact, trickle down to personal finance.
The economic uncertainty is paired with the number of infections, too. There is still a chance of a second wave despite Singapore’s best efforts to limit the spread of disease.
Not to sound panicky, but it is time to be smart with your personal finances until everything calms down. Here are some of the tips to do just that.
1. Make a Plan and Focus on Essentials
You might have already saved up a lot of money by staying at home and not going out during the last few months. Don’t spend them just yet. First, you must prepare an action plan for your finances. The plan should include all the projected expenses in the coming months, and how to cut down on unnecessary costs.
Making a plan will help you deal more efficiently with your finances. You will know what the essential expenses are, like food supplies, insurance, rent, etc., and what costs you can cut down on, like subscriptions, gym fees, shopping, etc. Focus only on the essentials for the next few months until everything goes back to normal.
2. Start Budgeting
An essential part of making a financial plan is to start budgeting and tracking your finances. Merely making a plan is not enough. You should know how much you have in your bank account, how much you are spending, and where. Budgeting will help you analyze your expenses and make them more cost-efficient.
There are many softwares and applications that you can use to track your expenses. You can also use spreadsheet templates to track your expenses; they are more robust and reliable, but a bit harder to work with.
3. Don’t Panic Sell Stocks
If you have invested in stocks or bonds, do not panic sell. The market in Singapore is going through a downturn, and it is entirely natural to be anxious about taking more losses. Still, don’t do it as you will be selling the stocks or shares at ridiculously low prices, taking on more losses. What you should do, instead, is ride the downturn out. Soon enough, the global economy will be stable, and you will start seeing stable returns.
In fact, if you have some money to spare, consider investing in stocks right now. It sounds crazy, but it is a terrific idea. The dollar-cost averaging is at a record high right now, so you can buy generally healthy stocks from stable companies at cheap rates. Once the market goes back to being calm, you will enjoy stunning yields in return.
4. Don’t Stop the Debt Payments
Similar to panic selling their stocks, many people have also stopped paying off their debts. Avoid doing this, especially with credit card debt (if you can afford to). If you don’t pay your debts right now, they will start compounding interest, and you will lose a lot more money in the long run.
However, you may not be in a financial position to pay off your debt. In that case, contact the bank or loan provider and explain to them your situation. Almost all the banks in Singapore are offering payment deferment options that you can opt for.
5. Reinforce Your Contingency Funds
The job market is also uncertain at the moment. Millions around the world have lost their jobs, and businesses are shutting down too. You must have a backup plan if your career is held on hold, even for a while.
Make sure your emergency funds are robust and easily accessible. Start building up on those too. As a general rule, you should have at least 3 to 4 months of your living expenses covered by the emergency fund. And in the current scenario, the more you have, the better.
Sure, you might have to spend the next few months being frugal, but if all works out well, you will have enough money saved up to splurge as you want!
6. Find Alternative Sources of Income
As mentioned above, if your job or business is put on hold due to the pandemic, you might face a financial crisis. Your emergency funds may not be enough. So, work on finding an alternative source of income for yourself and your family.
The current gig economy allows you to earn a lot of money without stepping out of the house! If you already have a lucrative hobby, turn it into a side gig. For example, you can teach guitar lessons or recipes remotely using the internet or offer online courses for niche fields. There are so many ways you can make money right now; all you need is a little commitment and hard work.
7. Help Your Community Out
Lastly, remember that you are not the only one who is facing a financial problem. If you can, you should help out your community. How? It’s simple. Figure out how your community is facing financial difficulties due to the COVID-19 pandemic, and contribute to making their situation better.
Your community does not just have to be your local neighbors. Instead, it can be anything from your favorite cafe around the block or your favorite Youtuber. You don’t have to do much, either. Help as much as you can.
The world is going through quite a difficult time now, and we must be strong enough to overcome the economic downturn. So start planning and budgeting, cut down on unnecessary expenses, and don’t panic. Panicking has never helped, and it will not right now either.