The adverse effects of the epidemic
More than our physical health, COVID-19 will adversely affect our financial health. Tough times call for tough measures. With tough measures, preparation is key. Even as governments have rolled out COVID-19 economic response plans, it is essential to develop a personal financial action plan. For some, they have been hit with pay cuts, reduction in working hours, furloughs, or termination of employment.
Such actions call for restructuring your financial resources in order to maintain your financial health.
Read on to find some of the strategies that you can include in your financial action plan.
Prioritize your health
Health is key, but even so, proper healthcare doesn’t come cheap. Beyond observing the safety precautions to prevent the spread of Coronavirus disease, it is essential to update your medical insurance cover.
It is a global policy among insurance firms not to insure policyholders against pandemics given the financial impact that insurance firms are likely to incur.
However, in Kenya, insurance firms agreed to extend their coverage to policyholders in the event a person suffers from COVID-19.
Firms such as UAP, AAR, Resolution Health, etc. have agreed to insure existing policyholders.
Equally, service providers such as NHIF have extended their deadlines for the selection of outpatient facilities. This move is to facilitate access to medical and health facilities by low-income earners that cannot afford other insurance premiums that are slightly costly.
Whether you are registered with NHIF or other insurance firms, your priority should be to update your medical cover so that when the need arises, you will be assured of receiving medical care at a facility of your choice.
Under the current circumstances, your ability to meet your financial obligations might be inhibited. Reassessing your debt obligations should be top of your list.
Consult with your lender and be honest about your current financial status. The expected outcome should be anything from an extension of the repayment period, waiver on interest, a moratorium, reduction in monthly repayment fee, etc.
For instance, in Kenya, the Central Bank of Kenya has since required commercial banks to provide relief to borrowers with loans that were up to date by March 2nd by up to one year.
You can inquire with your banking institution as to the measures they plan on initiating to cushion borrowers from the anticipated economic recession.
The rule of thumb in times of crisis is not to panic. With everyone experiencing financial anxiety, composure and patient will be the difference between making a decision that will dent your finances or making an informed choice.
Particularly in matters of long-term investment, do not rush to liquidate, sell-out or pull out. The best option would be to ride-out the waiting period.
Once the situation normalizes, you will be glad you held on to your investment.
Also, if you are thinking of investing, think long-term investments and not short-term.
The stock market is cheaper now and could be a viable option. Equally, you can have a mixed portfolio of both short-term and long-term investments to ensure that you are covered now and in the future.
With uncertainty comes the need to have a fallback plan. Your emergency fund should be able to sustain your basic needs for three to six months.
If you still can, continue building your emergency fund if you can to ensure you have up to 12 months of expenses funds. If you are experiencing a reduction in cash flow, do not feel guilty dipping into your emergency fund.
After all, the current situation constitutes an emergency.
Ensure that the areas where you are spending these funds are absolutely necessary and you cannot forego.
Now is the time to be on the lookout for relief measures that have been issued by the government and financial institutions. Taping into these resources will ensure that you hold off on spending your emergency funds.
Equally, you can reorganize and re-prioritize your budget to allocate funds to matters that are more pressing like updating your insurance cover.
Relief measures are not only for your personal finances but also for your business’s financial needs.
Take action now! You might be feeling shortchanged especially if you have been furloughed, received a pay cut, etc. but you remain at an advantaged position if only you can initiate a financial action plan at the earliest time possible.