While coronavirus chaos rages around the globe and many of us are in lockdown, with far too much time on our hands to dwell on the anxiety-inducing potential consequences of this horrendous pandemic, it’s very easy to feel that we are losing control of our lives. Which is why it’s so it’s important to take control where you can.
Financial planning – frequently neglected when we are dealing with the pressures of normal life– is a great way to use your spare time positively to take control in a crucial area of your life. As a bonus, you will find it gives you some much-needed peace of mind.
Here are five practical things you can do to get your financial house in order during lockdown:
- Review your spending habits
One of the advantages of lockdown for many people has been the curb on frivolous spending. That makes it a great time to review your spending habits and separate essential expenditure – on mortgage payments/rent, bills etc – from discretionary spending. The chances are that the latter has decreased significantly over the last few months and you can use this as a springboard to make adjustments to your spending habits when life is back to normal, budget more wisely and start saving. For example….
It turns out that the $4 per day flat white you buy on the way to work is not essential expenditure! Save $1,000 in a year simply by cutting out the caffeine ($4 x 5 days per work week x 50 work weeks a year = $1,000) and hey presto, you’ve got a bigger emergency fund than 69% of Americans.
- Work out what you really want in life
Goals will motivate you to forego that daily coffee, or stick to any other spending cuts you decide to make. Tricky times often fuel reflection which makes them a great time to think about what is really important to you. Harness that and use it to set some concrete goals. Whether you choose to save up to buy your own home, send your kids to uni, buy your dream car (although bear in mind point 1!) or secure a comfortable retirement, come up with a long term plan of how to save and invest to make your goals reality. At this stage a financial planner is a good ally to get on board to crunch some numbers.
- Look beyond cash
Post-Covid-19 interest rates are even lower than pre-pandemic – the Bank of England has cut rates to just 0.1% – so cash is most definitely not king if you want to grow your wealth. Although stock markets are volatile, and a corona-induced crash is undeniable, history shows that over the long term shares have always outperformed cash. In fact the current dip in the market is actually a great time to invest towards your long term goals if you follow the golden rules of investing in quality and diversifying.
- Protect against the unpredictable
If this crisis has taught us anything at all it is that life is unpredictable and protecting your finances is more vital than ever. First up, you need an emergency fund to see you through tricky times like, oh I don’t know… not being able to work because of a global pandemic!
Next up on the protection front are life insurance, critical illness cover and income protection, essential tools for protecting you and your family. If you find it hard to work out your requirements, this also falls within a financial adviser’s remit.
- Find a financial ally
If you don’t already have an adviser, now could be a good time to get someone on board who can help you crystallise your thoughts and implement a plan. If you already have a plan but wonder if you could perhaps be doing better, maybe lockdown is the chance you’ve been waiting for to get a second opinion.
Although face to face meetings are out right now, it’s business as usual for me during lockdown. If you’d like to talk about any element of your financial planning I’d love to hear from you. Contact us for an informal chat and let’s ensure that some good comes of this awful situation.
A leading provider of expat financial services and wealth management services across Asia.
