COVID-19 is probably the most searched word on Google in the last one month. The virus has challenged the healthcare system of every country where it has raised its ugly head. Apart from the impact of the virus on the life of people, this unique disease has a devastating effect on the economy. This is unprecedented; where a health challenge has led to a very grievous economic and financial crisis.
Unfortunately, no one predicted that the first quarter of a new decade would present such a challenge to everyone. Our responses to the financial challenge associated with COVID-19 differs due to the type of financial habits each of us had inculcated before now.
No need to cry over spilt milk, right? Here are few suggestion on how to manage your finances during this period of uncertainty:
- Stick to your budget
Simply put, abudget shows how income is spent on various items of expenditure on necessities, comforts, luxuries, and other needs or wants. I assume you had a budget, either mentally or written down, before the outbreak of COVID-19, right? (We will talk about budgeting process some other time).
The temptation everyone will face is to throw caution to the winds and assume that more things are required and the need “stock up” during this period. You truly need to get a number of necessary items which will be just enough for you and your family as long as this lockdown continues, but you need to exercise a lot of discipline on the number of items to buy and more importantly your consumption pattern. The risk that some of these things will get spoilt exists and this needs to be mitigated by being disciplined.
Think about it this way: your gross income will likely not increase during this period. If your expenses increase, the outcome is simple, you will begin to deplete your reserve! So it’s time to exercise discipline with your budget. Don’t buy out of panic!
- Take your vacation now
A vacation or holiday is a period of leave of absence from your regular job or daily routine. The issue here is that we do different things during vacation e.g. travel around the world on tourism, pay visit to friends and loved ones, get involved in recreational activities, spend more time with family and loved ones etc. Vacation can be a huge expense line on your annual budget for the year depending on how and what you plan to do.
COVID-19 has afforded you a period of absence from your daily routine! Maximise it. Rest! Play games! Read books! Sleep!Shift your paradigm by taking a cheaper vacation this year during this period and defer the usual expensive vacation to next year. You will be amazed at the cost savings you can make on vacation this year.
3. Add value to yourself
This has a very direct impact on your finances than you may think. The world pays for value created! Your present income is a function of the perceived value you are creating. If you really want toimprove your earning capacity, increase the value you can create.
How? Acquire new skills. Read books. Have you noticed an area where you need improvement? Do something about it now. Make research on how to improve on that area e.g. does your job require a level of proficiency in Microsoft Office and you do not possess the skill? This is a great opportunity to learn. The internet is a well of information. You may not derive the value right now, however you will position yourself for higher income once this period is over.
Be careful to not take on new habits during this period, which will become huge cost to you without a corresponding income. There is no use grumbling about COVID-19 and its challenges. Opportunities abound during challenging times but very few people see it.
Ayorinde Banjoko is the Chief Financial Officer of FBNQuest Capital Limited. He is a Chartered Global Management Accountant and a member of Institute of Chartered Accountants of Nigeria.