Two years ago many of us had not even heard of coronavirus. We certainly would not have predicted the long-lasting impact of the pandemic across the globe. In fact, this time last year we were being told it would all be over by Christmas and yet, here we are approaching the last quarter of 2021, still living with the effects of Covid-19.
We have all seen that life can change in an instant. We have been reminded not to take anything for granted. We have re-evaluated our priorities as a result. Let us see how these life lessons can also be applied to our financial situation.
Review your plan consistently
You never know what is round the corner. Expect the unexpected. Such statements have never been so applicable.They underline how crucial it is to review your financial circumstances on a regular basis. How stable are your finances in reality? How long could you and your family survive if your income suddenly disappeared? It may be that the pandemic has caused you to change your views towards your type of employment and your long-term goals. Maybe you have decided to consider a different retirement date. If so, review your financial plans and adjust them accordingly.
Rethink your emergency fund
Many people lost their source of income due to the pandemic, often almost overnight, affecting them and the people that depended on them. Whole sectors, such as the hospitality, travel and event industry were dramatically affected, with the effects being felt right down the supply chain. Many had no choice but to reach for their rainy day fund, despite the government schemes available. The traditional belief has always been that three months’ living expenses should be sufficient in a crisis. Unfortunately, the current situation has shown saving up to three to six months’ worth would be a more realistic figure.
Make sure your income is coming from different sources
If you are a business owner, do not fall into the trap of tying all your money up in the business. The pandemic flagged up the danger of some households having all its revenue-earning members in the same business or sector. Of course, this would have had a major impact if they were all furloughed, or made redundant at the same time. Think about whether you have any assets that could bring you a rental income? Or provide a dividend or interest?
Consider the value of your assets
What market is there for your assets? Take into account the time frame needed to access them.
It is important to make sure your savings are not all tied up in property as it is hard to unlock money quickly. You could also risk not getting a good price if it is known you need a quick sale.
Equally, make sure you do not just have money sitting in the bank. Interest rates on savings accounts are low, so your money needs to be working for you in a number of different places to suit your timescales.
Review your assets
Accessing your assets in a crisis, is only a good idea if they were created with sound investment principles in mind. Consider whether you will be able to access them at a fair value at a reasonable cost and time. Remember, you will lose out if you withdraw funds that were designed to be invested for a long time.
Who knows what the future will hold? We are likely to be living with coronavirus for some time. But if anything positive is to come out of the pandemic, it should be that we remember the lessons it has taught us. Crises often change our habits. Make sure that happens where your finances are concerned too.