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Staying financially ready during and after the Coronavirus

Why does the virus affect my wallet?

We are in the midst of a global epidemic. The COVID-19 causing SARS-CoV2 virus, better known as Coronavirus has forced many countries into lockdown, thereby restricting the mobility of people. Being confined indoors has affected the economics of many ventures, companies, and even countries with the global GDP predictions being slashed for 2020 and 2021.

Many industries - like catering, hospitality, travel, insurance, and medicine are affected severely - with people working long hours, being prone to burning out, and even being laid off. 
These trends have severely affected the stock market, with almost all indices falling quickly.

This affects millions of people - their retirement accounts, investments for goals and even their monthly incomes. Additionally, affected people would need to tap into their savings to get by or to pay their medical bills.
Stock markets have plummetted because of massive sell-offs triggered by the epidemic scare


5 things I am doing:

1. Health is the first priority
Staying safe and healthy should be an absolute priority. This means "not getting sick" and "not spreading the sickness", and government rules are a good means of ensuring this. In the Netherlands, citizens are urged to regularly wash their hands with soap, avoid venturing out for non-essential purposes and maintain at least 1,5m distance between each other.

Good health includes:
--> Eating well (while not hoarding supplies)
--> Supplementing well (possibly with multi-vitamins)
--> Exercising indoors regularly (HIIT, Yoga, Zumba and Functional training can be great means) 
--> Following practices for improving mental and emotional health (reading, meditation, connecting remotely with friends and family are good ways).
Skip the crowded gym, and try some HIIT, Functional Training or Yoga at home

2. Modify financial strategy (if necessary)
Maintaining a liquid, emergency fund with 3-6 months worth of expenses is always recommended. However, in today's situation, it may make sense to be prepared with expanding this fund to 6-8 months, especially if one works in an industry threatened by the virus (like travel or hospitality), or if they have a temporary contract that expires soon.
The best way to have enough cash and to build an emergency fund is to prioritize savings and cutting expenses, and if possible by increasing earnings. Ruthless budgeting can be a very valuable skill in these times.
I don't think this is a good time to generate the cash (and emergency fund) by selling investments since that would mean incurring a loss. This strategy should only be resorted to if cash is very very essential, and there are no other options.

3. Ensure good insurance
This shouldn't be a problem in the Netherlands since it is mandatory for every Dutch resident to get their health insured. The costs of treatment can be huge, and one would want to avoid shelling that out of their pocket. So, it is advisable to get good health insurance, especially for people older than 45 or with respiratory problems (since the COVID-19 disease affects this group more adversely).
At the risk of sounding dark, I'd advise life insurance too, especially if you have a family that depends on your earnings.

4. Stick to your investment plan and re-balance if necessary
Seeing the market crash scares everyone. I am no exception and the thought of selling all my investments has crossed my mind multiple times over the past few weeks. Although hard to resist, selling these investments would be a mistake, since they would be sold at a loss.
In these super-volatile days, it may make sense to postpone any major investment decisions by 2 days. This gives time to think over the decision and make a calculated choice, instead of being driven by emotions.
--> A good financial move may be to rebalance portfolios. In today's situation, this would mean selling debt assets and buying equity. This seems counter-intuitive but is a good move. Rebalancing now would effectively mean selling debt assets when they are high and buying equity when it is low.
--> After creating a large enough emergency fund, I would also consider investing in equity-based index funds, that capture stocks from cash-rich companies. Why cash-rich companies? The logic here is that the "recession-like-market" would make it hard for businesses without cash to survive. So, it's sensible to buy stocks of bigger companies (with lots of cash) when they are at their lows.
This may be a good time to rebalance your portfolio

5. Avoid cash, pay digitally
Personally, I have always been a fan of how technology has affected the payment landscape. I believe payments-technology can help a lot in today's situation involving a fast-spreading virus.
While not proven scientifically, the Coronavirus could survive on surfaces including banknotes. Making more digital payments (think cards or payment apps) would reduce interaction with cash and hopefully reduce avenues of the virus spreading.
Similarly, ordering groceries online would reduce walking into crowded stores and help maintain the required social distance.
Is handling less cash a means of reducing Coronavirus' spread?



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