How to take care of your financial health during coronavirus? You will learn which financial steps you need to take right now so that you have fewer worries and focus on things like family and your health.
There are many headlines screaming for our attention.
Coronavirus: France shuts most public places
Italy reports 368 coronavirus deaths in 24 hours
India’s poor testing rate may have masked coronavirus cases
WHO declares coronavirus crisis a pandemic
The media are producing a lot of articles around it, which is great for staying up to date with the latest developments.
However, it’s hard to filter all the messages that are not helping us and feeding the fear that many are feeling at this moment.
In this post, we will talk about what coronavirus (COVID-19) means for our financial lives and how to build your financial foundation right now.
Let’s dive in!
COVID-19, or the coronavirus, has resulted in a big health crisis around the planet. This is not only influencing our health, but also our financial lives. The World Health Organization tells us that the majority of the COVID-19 cases are mild and some may not have any symptoms. Despite this, it’s still impacting many people financially.
There are two parts to that. First, your personal life, which means that you need to stay home from work because the schools are closed and you don’t have any paid time off lined up. Second, the entire economy. The entire supply chain is changed as factories are closed and there is a lot of uncertainties in the entire economy.
The bad part about all of this is that we don’t know when the uncertainties will and all will go back to normal.
The good part is that generally in history, economic recoveries from viruses we previously experienced were pretty rapid, let’s say less than 6 months.
Unfortunately, history does not give us any guarantees about the (financial) uncertainty and economic recovery.
But, there are some things that you can do.
For your peace of mind.
For your mental health.
And for the wellbeing of you and everyone around you.
How To Build Your Financial Foundation Right Now
The important thing is that you are staying inside your home more. Social distancing can be difficult, but it’s important that we prevent overwhelming the hospitals with too many sick people at the same time.
We want to prevent the doctors and nurses in the hospitals have to choose who lives. That is the most important thing at this moment.
In the Netherlands, measurements are being taken. All restaurants are closed, events with more than 100 people are canceled, people are working from home, schools are closed, and some need to self-quarantine.
The time that you’re spending in your home now could also be spent on focusing on your money and how you can make a great foundation going forward.
Build the financial foundation now and benefit from that for the rest of your life!
1. Do You Have An Emergency Fund?
This is THE moment for which you’ve saved all those years for your emergency fund. This is three to six months of savings that you can access any time you want.
If you have an emergency fund and have the cash available, I’m super proud of you. You can continue to step #2 by clicking here!
When your income unexpectedly drops because of the coronavirus, you need to spend less on uncritical spending until you can resume your job as normal.
Think about what you need to spend most on right now, how your situation could change in the upcoming months, and how much money you could need.
Ideally, you want to have between three and six months of cash. When this is not possible, focus on freeing up some money from your current cash flow.
Some quick tips for getting more cash if you don’t have an emergency fund. Consider all the options before you make a decision:
- Check your options – There are many countries now where no interest on student loans has to be paid, like the US. For other countries, like the Netherlands, you can apply for deferring your loan payments within the first 6 years of having to pay back your student loans.
- Stop paying down additional on your loans – When your interest rate is less than 10% it could be better for your peace of mind to cut back on paying down your debt. Only pay the minimum amounts.
- If there is no other option – When you have run all out of options, it can be convenient to dip into the credit card you have available. Please don’t do that unless absolutely necessary!
2. Review Your Spending
Now that you know the importance of saving for an emergency fund, let’s go and review the rest of your spending.
The thing with situations like this is that it’s very clear what matters to you. When you have that clarity, deciding what you want to spend on is relatively easy when you want to review your spending.
Review your latest credit card statements, bank statements, and any cash that you may have used.
It’s kind of like starting a budget. You think about what you want to spend monthly and you review if that is what actually happened.
Same with this.
You are going to review whether or not you are happy about your spending.
Ask yourself this:
Did your spending align with your values?
What spending do you have right now that you don’t normally have? Like higher grocery spending or getting things delivered.
Important: don’t hoard toilet paper and canned food.
The people that are working 12-hour shifts at the hospital also want to have some groceries in their house once they finish their shift and can finally go home!
What spending will go down in the upcoming weeks? Like travel and entertainment.
If you have a hard time with this check out:
- How I Live On Half My Income – And You Can Too!
- 15 Frugal Living Tips (How To Be Frugal)
- Why Frugality Is Not Boring (Having Frugal Fun)
- How Much Money Should You Save Every Month?
3. Start A Side Hustle
If you’re experiencing loss of income or just more free time, you may want to consider a side hustle. There are many great side hustle ideas that you can do right now.
A couple of ideas include:
- Start a blog – write about your experiences and connect with like-minded people
- Start proofreading
- Sell stuff from your home
- Become a virtual assistant
- Go walk dogs from people around the neighborhood
4. Start Building Passive Income
If a side hustle is not something you’re looking for right now, start building your passive income sources.
It is super great to have alternative sources of income besides your day job. When the income is falling away for some time this is less of a problem. It still sucks, but you are experiencing fewer (financial) issues.
How can you start building up passive income?
There are many different sources of passive income. My favorites include:
- Dividend investing
- Peer-to-Peer lending
- Real estate crowdfunding
With dividend investing, you buy a stock and you get regular dividends from that stock. That means that every month, every quarter, or every year you receive part of the company’s profit as a thank you for investing with them.
This is usually somewhere between 0.5% and 3% of your investment, which is quite a great addition to your investment.
With peer-to-peer lending, you basically lend your money to another individual or company. The amounts you invest in one loan are usually small, which means less interest rate. The interest you receive on that is in many cases above 10%.
I am a big fan of peer-to-peer lending, you can start by reading this article.
Personally, I invest in three different peer-to-peer platforms, namely:
- Mintos – the largest P2P platform in Europe. I’ve analyzed their loan originators here.
Check them out now and start building your passive income today!
Real Estate Crowdfunding
Real estate crowdfunding means that you’re investing in part of a property. You buy 1000 EUR of a property instead of the entire building.
That means the same yield, like rental income, but less risk. You can spread your money towards many different properties in areas around the world, instead of just focusing on one property in one area.
I have outlined the 9 best real estate crowdfunding sites for you to start right away!
5. Stop Checking All Your Balances
I’m sure many are doing this with me, but it’s hard at these times to stop constantly checking your balances.
Don’t try to time the market. Why not? Because that means you’re relying on your emotions to make investment decisions.
If you’re facing panic, that’s probably not such a great idea.
As the markets go down, you see your balance gets lower and lower.
It is so tempting to take your money out.
Sit on your hands and don’t do anything.
If you’re not invested on the 10 best days of the stock market, your investment returns will be 2.65% instead of 7.7%. That’s a 5% difference in yearly return, just because you missed out on 10 days.
Thinking about your financial health during coronavirus is a good thing.
It is the perfect time to review your money situation and see where you’re at. Improving your financial situation will benefit you for many years to come.
Build up an emergency fund, review your spending, start a side hustle, build up your passive income, and avoid checking your stocks all the time!
When you’re done, keep calm and wash your hands.
How are you dealing with the coronavirus breakout?
Founder of Spark Nomad, Radical FIRE, Journalist
- Expertise: Personal finance and travel content
- Education: Bachelor of Economics at Radboud University, Master in Finance at Radboud University, Minor in Economics at Chapman University.
- Over 200 articles, essays, and short stories published across the web.
Experience: Marjolein Dilven is a journalist and founder of Spark Nomad, a travel platform, and Radical FIRE, a personal finance platform. Marjolein has a finance and economics background with a master’s in Finance. She has quit her job to travel the world, documenting her travels on Spark Nomad to help people plan their travels. Marjolein Dilven has written for publications like MSN, Associated Press, CNBC, Town News syndicate, and more.