The COVID-19 pandemic has rocked the world and the economy suffers. Millions of people are out of work and struggling to pay the bills as the world recovers from this devastating virus, but it’s not the first time the economy has crashed. Here are some tips from challenging times in the past.
Build an emergency fund
If you’re worried about losing your income due to the COVID-19 pandemic, then it’s imperative that you build up an emergency fund. Many governments have responded to the crisis with enhanced benefits for the unemployed, but a well-maintained emergency fund can prevent you from drowning in debt or dipping into retirement savings as you look for work and wait for the economy to recover.
Learn how to make a budget
When a financial crisis hits, responsible spenders inherit the earth. If you’ve lost your job or you’re living on a reduced income, sit down and examine your spending habits. Even if you still have your job, it may make sense to sit down and write up a “doomsday budget” to prepare for the worst-case scenario.
Use your debit card
Financial advisors often recommend paying for things in cash to stick to your budget. Unfortunately, public health officials are recommending that people avoid cash transactions, as paper bills and coins can transmit the coronavirus. For the best of both worlds, stick to using your bank card so high-interest credit cards don’t crush you if you lose your income.
Look for a side gig
With all that extra time on your hands during this pandemic, why not pick up a side gig to help buttress your financial fortunes and build up an emergency fund. While brick-and-mortar shops are closed, e-commerce is booming, so it’s a perfect time to monetize a hobby and start your own online store.
Negotiate with your landlord
The silver lining to recessions is that housing becomes more of a tenant’s market. If the housing market shrinks, landlords are more likely to make concessions in order to keep some money coming in for maintenance and mortgage payments, especially if evictions have been halted as they are in many jurisdictions during the COVID-19 pandemic.
Reach out to your creditors if you need help
If you might be unable to make debt payments while the economy is shut down, but you’re currently in good standing with your creditors, ask them for help before you do anything else. Equifax, one of the three major credit agencies in the United States, says that you can negotiate delayed payments or reduced interest rates to protect your credit rating.
Pay off your debts while you still can
If you’re lucky enough to still be employed, remember that recessions are the wrong time to take on unnecessary debt. If possible, you should try paying down any existing debt, as lenders sometimes increase minimum payments during recessionary periods, and make it tougher for people to get credit when they really need it.
Look for investment opportunities
Investors understand that recessions aren’t all doom and gloom. Throughout history, markets have always recovered from economic downturns. Stocks and investments are being sold for cheap right now, making it a great time to invest for anyone who has the liquidity to do so and has the patience to wait until the market improves.
Keep an eye on real estate prices
Recessions have a habit of causing housing prices to fall, which might actually come as a relief to millennials who haven’t been able to purchase their first home in a booming real estate market. If you feel secure about your financial situation, keep an eye on housing prices as the pandemic creates a buyer’s market for homes.
Go easy on the online shopping
Brick-and-mortar storefronts have largely closed up during this pandemic, but online shopping is thriving. Before you make an online purchase during this crisis, take a deep breath and ask yourself if you really need the thing you’re buying. Remember, digital stores make it so much easier to purchase things impulsively, which makes it more difficult to be disciplined in your spending.
Stay away from scams
Unfortunately, there are people in this world who take advantage of crises like the COVID-19 pandemic. In the United States, the FTC has warned Americans to be skeptical of calls related to medical benefits during this time, which are using the crisis to phish for Social Security numbers, access to bank accounts and other confidential information.
Create a gym-free exercise regimen
Gyms are closed in most jurisdictions right now, as they are a high-risk site of transmission for the coronavirus, and many people are learning how to work out from home. In previous times of crisis, people learned how to get by without spending on unnecessary amenities, and you can carry on this tradition by continuing your home workout sessions when this pandemic is over.
Look for low-cost entertainment options
Famously, the board game Monopolygained popularity during the Great Depression. While much can be said about the social component of the game, there’s no doubt that families appreciated the low-cost entertainment provided by a simple board game, which one can also turn to in the face of an overwhelming array of digital, at-home entertainment options.
Find a cheaper rental
While homeowners may find it difficult to sell their home during the current crisis, tenants have more options. Rent tends to be fairly stable during a recession, but tenants with reduced income may find it prudent to move to a smaller unit or forgo the benefits of their current location for something less expensive (especially if they’re not supposed to leave the house).
Consider entrepreneurship if you lost your job
If you’ve always dreamed of being your own boss, this could be the time to become an entrepreneur. While it may be difficult to get credit or build a customer base during a crisis, the pandemic may offer the time needed to get a new business off the ground, and opportunities to disrupt existing industries as they struggle to adapt to a new reality.
Prioritize the bills you need to pay first
Bills are constant in life, even during a pandemic and even if you lose your job. As a rule, housing comes first, utilities and car payments come second and everything else is lower priority, though some calculations can be made based on where you live and whether or not you can be evicted or have utilities shut off during the pandemic.
Buy in bulk
Public health officials are recommending that individuals limit the amount of time they spend shopping, meaning no quick trips to the corner store for missing ingredients. Take advantage of this and learn how to purchase in bulk effectively, getting cheaper prices for common non-perishable items (and avoiding bulk purchases of things that will go to waste).
Learn how to cook with inexpensive foods
During the Great Depression, families learned how to “make do” on reduced budgets, making foods with readily available bread products that “mocked” more expensive meats, dairy or fresh produce. While some of those recipes seem extreme, you can take inspiration and learn to make meals from the more inexpensive ingredients taking up space in your pantry.
Learn how to fix things
When something breaks around the house, think about learning how to make repairs yourself before calling the handyman. If you’ve temporarily lost your income, you may have more free time on your hands to learn the basics of home or auto repair, and there are plenty of online resources available to get you started.
Consider furthering your education and learning new skills
If you’ve been considering learning new skills or taking some time off work to go back to school, the COVID-19 pandemic may be providing you with an opportunity. Not only will you have plenty of time to take (online) courses while things are shut down, you’ll be better prepared for the future in case of an unexpected layoff.
Alan Jones, Espresso
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