How to Better Prepare Financially if there is Another Pandemic?
There is no denying that the COVID pandemic has been a frightening experience, most are worried about their health and the well-being of friends and family. The economy throughout the pandemic has also been frightening to observe. The only thing people were certain of is that we were headed into uncertain financial times. The advice from many in the financial industry was to not panic and to continue to follow the plan you had in place prior to the pandemic. After all, investing is a long-term game, and trying to time the market hardly never works.
As most Canadian provinces begin to reopen, people are hopeful that life will begin to get back to normal. However, it is tough to ignore the financial impact the pandemic has brought with it. You may have lost your job or faced reduced income, if you are a business owner you probably had a decrease in revenue and had to make some hard decisions about your business and your spending. All of this took many by surprise, and many were not financially prepared. Leading to the question, how can you better prepare in case another pandemic hits?
Have an Emergency Fund
At times of financial uncertainty, cash is king, and ensuring you have enough cash on hand to cover basic living expenses for 3-6 months is a good place to start. In the case of a pandemic, you cannot really be sure how long your income will be stalled for. Having an emergency fund to help you cover your family’s day to day expenses is crucial in helping you remain mentally healthy during these unforeseen times. Worrying about your family’s health and safety as well as finances can take a toll on anyone, and can lead to fractures in the family unit as stress levels will be extremely elevated. Having this emergency fund does not mean you will not be worried about finances, it will however relieve some of the anxiety associated with the financial uncertainty. Building these emergency savings is not an easy process, and most of us don’t have this kind of money available to just put aside. Setting up a monthly transfer from your daily banking account to an independent emergency account can help you save over time.
Build a Budget
By keeping track of your average monthly spending, you will easily be able to review your expenditures and eliminate any non-essential spending. Having the ability to reduce spending early into a pandemic will help stretch your savings further, and give you more financial security. There are free budgeting applications out there that will help you keep track of your expenses if you are not into learning new software you can always use a spreadsheet or even a pen and paper to keep track of your spending. It’s a good idea to cross-reference what you have recorded versus what is shown in your bank and credit card statements monthly to ensure your records are accurate.
Diversify Your Investments
Ensuring your investments are spread across different assets will help manage your risk during any unexpected downturn. Partnering with an experienced financial advisor will help give you the inside track on where to place your investments, they will also be there to look for any early signs of volatility. Over time a diversified portfolio should yield a higher return while providing lower risk than any individual holding. I said it before and I will say it again, investing is a long-term game, and having someone there to help you achieve your goals is undeniably a benefit.
There is no sure-fire way to completely protect yourself from an unforeseen financial downturn like the COVID-19 pandemic, but you can be financially prepared to navigate the next pandemic by making a few minor adjustments and building a few positive habits.
