Quarantined – staying at home and living the life of less social interaction has been the new normal. The covid-19 pandemic is not just a health crisis. It definitely changed the way we work and interact, but it also transformed the way think about our finances and survival. Here are important financial lessons we should learn from Covid-19.
1. Cash is king and emergency fund is a must.
Many Filipinos have been forced into “no work, no pay” scheme or even lose their jobs all of a sudden because of the quarantine. Lucky are those who had the chance to set aside a small amount of money for their use in today’s emergency. Majority probably aren’t able to do that either because they don’t really have any to set aside or they thought it is better off spent than left sitting in their bank account. Covid-19 has become a typical case when we realize the importance of having savings as a safety net.
How much should you save as emergency fund?
The basic rule of thumb for emergency funds is keeping between three months and six months’ worth of living expenses to cover unexpected bills or crises. It should be a liquid asset in form of cash or placed in a savings account that is easily accessible. Having an emergency fund is your first line of defense against debt and can save you from further financial ruin. If you haven’t built your fund yet, now is the time to re-evaluate priorities and start it today. You can start small by saving let’s say 10% of your income. It will come a long way if you will be consistent.
2. Life and health insurance is essential.
Nobody wants to die too soon or get sick, but reality is – death and illness are life uncertainties. You never know if, when and how it will happen, especially now that we are in a global health crisis. But when it does happen to you and you come unprepared, it can wipe out your life savings and future income.
I cannot emphasize enough the importance of having adequate life insurance to give you peace of mind and assurance that your family will be taken care of financially, in case of untimely death. Also, if you cannot afford to spend millions for COVID-19 or critical illness treatments, then it’s time for you to consider getting a health insurance. Life and health benefit policies provide instant and guaranteed fund that is there to help you when you need it the most.
When is the best time to get a life and health insurance?
The answer is when you are still insurable. Meaning, when you are still healthy. Because when you’re older and sicklier, the premium is much higher and the approval is not guaranteed.
If you want to know how much life and health insurance costs, you can sign up to request a free quote/proposal here.
3. There is an opportunity to invest and grow your money.
You’re probably hearing that stocks are going down now, yes, it’s true. COVID-19 affected the whole world’s economy. But let me tell you, it’s still the best time to invest. Have you ever heard about the phrase “buy low, sell high”? Many investment experts have said this time and time again. If you have extra funds, now is the good time to buy stocks or bonds because the prices are low and hence you are getting the investments way cheaper. Time will come, the stock market will rebound and by that time you would’ve already earned profits from your investment.
Where should you place your money to invest?
If you are new to investing, I recommend you to invest in mutual funds (in equity, bond or index fund) today. You can do this through a broker or financial advisor.
Learn more about Mutual funds.
But if you want to try direct stock investing, and thrilled to buy Jollibee (JFC) or SM shares on your own, you can do so by opening an online stockbroker account such as through BPI trade or COL financial. Do take note that it’s riskier to invest directly than through mutual funds.
Learn more about stocks and stock investing.
4. You should diversify your income.
Diversified income sources can help a lot in times of crisis. When one door closes, you still have other options to keep money from coming in so you will not be that vulnerable to economic downturns. More income streams equal more security. It pays to have other sets of skills aside from the ones you’ve been doing for years now. It can help you improve your financial cash flow.
How many streams of income should you have?
“You’ll catch more fish with multiple lines in the water,” – Greg McBride
It depends upon where you are financially, and what your financial goals for the future are. But having at least a few is a good start. Now that we are still under quarantine, it is a great opportunity to learn new things that might give you additional income streams even after you face the new normal.
5. Planning and budgeting is helpful.
The Covid-19 pandemic will likely continue to affect your finances for years to come. Having a plan, prioritizing spending, and using resources efficiently will be the key to your financial stability. Plan by prioritizing where you would like your money to go. Ask yourself if the money you spend currently goes to the most important priorities in your life.
How do you make a plan?
Make a budget and stick to it. One of the hardest parts of budgeting is just developing awareness of our spending habits. I recommend using a budgeting app to help you track your expenses.