Economic clarity and security are not easily available as we reach the mid-point of 2020. This year is unprecedented for the global economy and to us all as individuals. No-one predicted a pandemic taking hold so quickly and completely, and the world is struggling to right itself since the pandemic arrived. Along with this we see mass redundancies, millions of people forced to work at home, small businesses forced to furlough staff and the plans of many completely interrupted. COVID-19 is undoubtedly an era-defining event, and the full economic ramifications cannot yet be understood. And while the future is unclear, one thing is certain – it’s time to take control of personal finances and do what we can to ensure we make it through these challenges intact. Here we listed out some personal finance tips.
5 personal finance tips to get you through COVID-19
- Resist the urge to panic-sell
Don’t sell your investments in a quick cash deal. Investing is an area where you only truly gain or lose when you do sell, and if you give in to panic and sell when your investments are down, you will not be able to recoup when they go back up.
Linked to this is the need to always think long-term. Panicky headlines and falling markets can pile the pressure on and make it feel like you must decide right now based on short-term impacts. However, whether we’re in the middle of a global financial crisis, or just a normal boring spell, it is not possible to predict what markets will do on a short-term basis.
This is why you should always look ahead. The financial crisis caused by COVID-19 differs in many ways to previous recessions or depressions. The most obvious way is that these economic breaks have been deliberately imposed by governments, financial institutions and world leaders. All of which should mean that when the world moves past the pandemic in its initial form, there is reason to believe markets will quickly get back on track economically speaking. The watchword here is ‘cautious optimism’.
- Don’t give up and write 2020 off
Stick as much as possible to the financial goals you set yourself before you’d even heard the word ‘coronavirus’. Granted, times are very tough right now and things are probably not going according to these plans, but that just means remaining flexible but stoic.
- Reshape your finances on a personal level
Look at this hiatus as an opportunity to look at your finances and really make some changes. Can you consolidate any debts or alter the way you spend, for example? Are your insurance plans up to date? Do you have a will? Tackle these financial issues right now to ensure that you’re in the best possible shape going forward.
One of the by-products of this pandemic is a distinct shift towards personal responsibility and introspection. There is always going to be a change you can make to tighten up your personal finances in some way. If you need to, work with a professional to ensure you’re doing everything possible to look after yourself and any family or loved ones.
- Take advantage of any help out there
Banks are not necessarily known for their caring demeanour, but during the pandemic many are offering a mortgage holiday. And for homeowners affected by COVID-19, this is a real bonus. If you’re adversely economically affected by the pandemic, get on the phone to your bank and speak to them about it.
Some banks are offering up to six months of a mortgage holiday, and while it will need to be paid back as part of your overall debt at some point, this easing off can be useful right now. There are also various Government funds, grants and schemes to help individuals and businesses during the pandemic. You can read more about the available help for personal finances here.
- Keep calm and think long-term
Investments should always be considered over the long-term, and particularly in times of economic crisis. And while you may be reading plenty about capitalising on the market volatility caused by the pandemic, I would urge caution here. Disruption does create opportunity but trying to capitalise on an uncertain market is a high stakes game. Remember that even the best hedge fund managers statistically fail to beat the market over a five-year period a whopping 80% of the time. For most of us, it’s unlikely that now is the time to take the chance.
Early signs suggest that the long-term effect of COVID-19 on the economy will be relatively minor. With a level-headed long-term view, our investments and personal finances should be able to weather this storm. Every day might feel uncertain and up and down at the moment, but this will pass.
The best advice of all personal finance tips I can leave you with is to focus on that which you can control. You can’t control COVID-19, and no-one yet knows the final toll it will take, either on the economy or on humanity.