by Judy M McCutcheon
We are definitely in crisis mode when we have a disease with flu-like symptoms, and people are fighting each other over toilet paper, good judgement has gone out the door.
In any crisis, a calm head is needed so that our decisions are rational and not emotional. Our emotions can render us irrational, and when irrationality steps in, we can be assured that we will regret the choices we made in that state. Some, if not all, the decisions we make when in an irrational state, can have long-lasting adverse effects. And in this specific case, panic buying can leave you with a stockpile of food and toilet paper, but little to no cash. And in crises, money is something we need to have handy.
What are the facts of this present health crisis? There have been more than 4,000 deaths, more than 113,000 cases reported in over 110 countries, and chances are if it’s not already in your country, it will be there soon. There are so many facts and alternative facts on social media that we are inundated with information and don’t know what to believe. Couple that with the fact that there is no known cure in sight, save and except for containment. Our fear of fear will send us into a state of irrational thinking and cause us to do foolish things such as stocking up on toilet paper when we don’t have an outbreak of diarrhoea, and it’s not one of the symptoms or side effect of Covid-19.
What we should be doing is following some basic hygiene rules, rules that we should have been following all along. Why should washing hands be trending now?
We need to look closely at the economic impact that the spread of this virus will have on our families, our communities, and our countries. Non-essential travel is being cancelled, and people are being asked to work from home, conferences and seminars are being postponed and cancelled. Entire countries are shut down, and large gatherings are being banned, social distancing is now a thing, schools and institutions are closing as a proactive measure against this virus. In addition to a health crisis, we also now have an economic crisis, a double whammy, especially to the poor and those already ailing. We need to look beyond the fear and see how this is going to affect us individually and collectively. Social distancing will see more people staying at home and restaurants and bar feeling the effects. Supermarkets, on the other hand, will see an uptake because people think that since they will be at home, they need more non-essentials to get them through this. My guess is that at the end of all this, gyms and other health clubs should also see a surge in membership for at least 3 months.
So, while we self-quarantine or adhere to mandatory bans and requests to stay at home so that the disease can be contained, we need to be sensible. I want to point out that during the Ebola outbreak, there was a spike in unplanned pregnancies in Sierra Leone, as I suppose people needed something to pass the time. Please remember that a child brings substantial additional costs that are much better handled when planned. Planning for a crisis should be no different from how you should have been planning. It’s just as the hygiene scenario. You should have been preparing; only this time, you double up on it. Let’s have a look at some of the critical elements of financial planning that we should have in place:
Budgeting – now more than ever, we must be careful with our spending. You should focus only on the essentials at this point. In this case, 5 bales of toilet paper should not be on your list of essentials. If you do not have a written budget, now is a great time to implement one. Remember, the proper use of knowledge is in its application. It is no use knowing the importance of having a budget and not putting it into practice.
Insurance – Now is the time to ensure that your health and life insurances are up to date. COVID-19 or not, one medical crisis could render you bankrupt. You also want to ensure that if the inevitable happens during this time, your loved ones are well cared for.
Estate Planning – making a will and planning your estate does not mean that you are going to die. It only means that you care enough to put things in place. You do not necessarily need a lawyer to write your will, but there are some fundamentals to making your will valid. Do your research.
Savings/Investing – a culture of investing is not normal or natural to us in these parts. However, I am advocating for it to become a part of our DNA. In a time of crisis, cash, or any asset close to cash is king. We should endeavour to have a combination of savings and investments in our portfolio.
Emergency Funds – For exactly times like these, we need to have an emergency fund. Financial wisdom dictates that we have at least 6 months of expenses tucked away so that we could survive without our kids going hungry while we work on getting our income back on track. One word of caution here, do not make the mistake of having your emergency fund in real estate. Real estate is the least liquid asset, and if you have to sell in a hurry, you will most likely have to sell below the value. Selling your real estate should be a last resort.
In essence, what am I saying to you is this, do not spend on non-essentials, create a budget, and put it to good use. Ensure that your insurances are up to date and not just your health and life insurance, but also your homeowner’s insurance since the hurricane season won’t take a back seat to Covid-19. Put a will in place or update the one you have, pay close attention to your spending habits. Think about how you are going to have fun while you practice social distancing as an unplanned pregnancy would increase your expenses. But most of all, stay calm, do not inundate yourself with unnecessary information, and please listen to your local health authority for news and updates that could affect you.
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Judy McCutcheon is a partner in the firm Go Blue Inc, a Human Development Company. www.goblueinc.net
