As if the spread of the coronavirus and the strain of physical distancing weren’t enough, there’s a third factor of this pandemic that has many people worried- the economic impact. Several businesses around the globe have shuttered, millions have lost their jobs, and stock markets have been affected.
Observing all this economic uncertainty can be frustrating and even frightening, even if you’re fortunate enough to have not lost your job or source of income. Fortunately, there are moves you can make now – while you’re stuck at home under quarantine – to protect your finances, even with an uncertain economic future. Take these actions now, and you’ll thank yourself later.
Regardless of whether you already have a budget, now is an excellent time to take a close look at your spending. If you expect or have already experienced loss of income, adjust your budgeted spending accordingly, wherever possible. Money may be tight going forward, so saving wherever possible will only help you in the future.
If you have the time and interest, you can even consider making a quarantine budget to help guide your spending during lockdown or social distancing. With so many common sources of spending currently unavailable – think travel, eating out, and entertainment – your household spending is likely to climb once businesses begin reopening, so plan accordingly.
If you don’t already have an emergency fund, now’s the time to make one. If you have money set aside for travel or non-essential spending, consider earmarking it for emergencies instead. Any amount you can tuck aside now, specifically to help support you and your household during an emergency, will help you later.
Pay down high-interest debt
Beyond credit card debt, if you have any high-interest debt, for example, a personal loan, and your income has not yet decreased, consider paying off that debt now, even if it means a small financial squeeze in the short-term if you are able.
If something happens to your income later on, you or your partner lose your job or you experience a pay cut or cut in hours, for example, you may not be able to make regular payments to reduce that debt, and it will continue to accumulate interest at a high rate. By the time you can make payments again, the amount you owe may be much higher than you expect, especially if you’re penalised for missing any payments. Paying down that debt as much as possible now – even if you can’t pay it off entirely – can help you down the line.
Also consider having a conversation with your financial provider about getting a moratorium on your loans.
If your lockdown is putting more time in your hands than usual, check another financial to-do off your list and request your credit reports. You can get all three or just one or two, depending on the last time you checked your reports. Read over your reports carefully for any suspicious activity, and if they reveal some less-than-ideal borrowing habits in your past, brainstorm ways to rectify them and improve your score.