Understandably, Covid-19 has created a state of general panic. That panic primarily relates to both the fear of getting sick or losing loved ones, but also the very threat to the global economy, to our businesses and organisations, and to our own jobs, careers and livelihoods. All of us, however wealthy we may be, and whatever resources we may command, have reason to be concerned.
And of course, for the vast majority of us, the financial implications are extremely real. Many of us around the world have already been laid off from work, if not made redundant. Many more are being forced to work reduced hours, take their statutory sick or even work for free.
Even if at this stage we’re fortunate enough still to have income, there is significant uncertainty of the economic future and a lack of clarity on how we need to protect ourselves going forward.
Nevertheless, on our personal financial front, no matter what our position, there are still things we can do to reduce the financial stress we are all experiencing presently. This is the time we need to be open and ready to do what it takes to survive.
1. Don’t Panic
I’ve lived and worked through several crises, not least the 2008 Great Financial Crisis and have seen the desperation and devastation. I have to say, this actually seems worse.
As I say, many people are already working reduced hours and salaries and many more have been laid off. This tendency seems to be increasing, as the outbreak stretches more widely. According to CNBC, the next expected hotspot is the US where in the coming months unemployment is expected to reach up to 15-20%. That unprecedented level is three times the unemployment rate before the outbreak.
But take a little hope from the following good news:
First, you’re not alone. And most of us will survive this. Both physically and mentally, but also financially.
Second because we’re not alone, i.e. there are many if us, governments are being forced to act to protect their citizens. And, as I’ll explore in a moment, though not particularly impressed by the health responses, I’m actually impressed so far with their economic ones.
Finally, remember that nothing is permanent, and this time too shall pass.
2. Get on Top of Your Cash Flows
I suggest all of us take this opportunity to look carefully at our cash flows. And if you’ve not done it properly before, now is the perfect time to learn a new skill! Write down the answers to these simple questions. If you follow this process step by step, I assure you you’ll feel more calm and less panicked about your financial situation going forward.
a. REGULAR MONTHLY COSTS
What are your regular monthly costs? Maybe use 6 months ago or an average of last year to find your ‘normal’ cash dispersions
b. MINIMUM MONTHLY COSTS
How can you reduce costs? Identify the unnecessary expenses you can cut, even if giving up your tennis classes is painful. They can wait and will be there when you’ll be back on your feet. Get clear on what is your absolute minimum monthly cash spend?
What are your liquid savings?
d. SURVIVAL MONTHS (=SAVINGS/MINIMUM MONTHLY COSTS)
Divide Minimum Monthly into Savings to get ‘Worst Case Survival Months’
d. REGULAR INCOME
What is the monthly income from work or elsewhere?
f. OTHER INCOME
How can you generate extra income? Think of alternative solutions to increase your cash flow. This can include asking family if appropriate
Get your spreadsheet up and running and keep it updated.
3. Open Conversation
I know I say it literally all the time. But clear communication is fundamental in any kind of relationship, especially when it’s about work, especially when it’s about money.
Ask your employer all the questions you need answers for and make sure you understand exactly the implications in each case. Remember however, in times like these, it may simply be true that your employer doesn’t know the answer. So be patient and understanding too. And of course, request anything important in writing
4. New Regulations Follow the Law
Drastic times deserve drastic measures and as I said, many governments have been quick to offer financial support for individuals and businesses. It’s essential to be on top of what your government is saying and act accordingly. I’ve seen situations where grants or support is withdrawn suddenly or without notice so you need to be fully informed and fully active to make the most of it.
By way of example, as of today:
The EU has suspended the Stability and Growth Pact so that the States members can spend the money that was designated to the common funds for their own emergencies.
Consequently, all the European administrations are elaborating specific plans to take care of their workers.
Germany has declared a Euro 500 billion bailout fund to help companies and their employees overcoming the crisis,
The UK will pay 80% of employees’ wages and it’s planning to protect renters from evictions.
Australia is offering mortgage payment holidays.
Most jurisdictions will delay tax payments due.
Check your government website and find out all your rights and benefits
5. Keep a Record
Keep a journal with all the key information regarding your financial situation so you’re not having to search for it when you need it in future. When did you receive your last salary? What did your employer communicate to you and when? What exactly did the government announce, when did you apply and how much can you expect to receive? When will the income from that investment you made few years ago hit your bank account?
By having all your essential financial information at your fingertips, whenever you need, for sure that’s one less thing to worry about!
6. Don’t Be Afraid to Ask for Help
Pride or shame can push us back when we really need to be asking for help. And if it’s about money it can be really uncomfortable.
This is an opportunity to put aside any shame, be open and vulnerable. And in doing so, delete the stigma. It's the most important time to speak with friends and family, to share the burden and help them understand what you are going through.
It’s also time to pick up the phone to professional advisors to ask what else can be done to help manage your finances.
I’ve helped navigate people and companies, large and small, through times of intense crisis before and I believe my most important observation is this: Act quick, before it's too late!
Be sure to keep your financial destiny in your own hands during these turbulent times.