What started like normal flu eventually turned into a world pandemic, Covid19, which is still here with us surviving. From the pandemic effects, the financial situations for most people and companies have really been affected, where, some have uncertain futures, while others are being forced to replan on their initial lifestyles, normal operations, and working techniques.
However, the world is slowly regaining back its normalcy from these effects. Therefore, it’s the right time to review and learn some positive financial and investment lessons from the pandemic. This will put us in a good disaster preparedness position to overcome any future disasters with adverse effects like Covid-19.
Minimize Your Debt Load.
There’s a good chance you’re paying off a student loan. But you might also be paying down credit card debt, car loans, and a mortgage at the same time. With a good financial income or credit score, paying these loans has been manageable until the Covid-19 outbreak and post-pandemic effects.
Besides the loans, there is a daily expenditure that one cant do away with, maybe, only minimizing the amount.
A good lesson learned is to avoid getting yourself into that vulnerable position in the first place. Borrowing, whether for good reasons will still result in debts that will need to be serviced monthly. This will be a huge burden if the income has fluctuated and some jobs have been lost.
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Know Your Personal Cash Flow.
You’re probably aware of how much money goes into your bank account each month. But do you calculate how much you spend?
Tracking your earnings and expenses will help you understand why your monthly cash flow is positive or negative. A personal cash flow that’s positive allows you to direct extra funds to pay down debt, boost savings, or increase investment contributions. This should be the spirit.
Always be prepared for the unexpected.
It is quite essential to save money in an emergency fund, to keep you prepared for unexpected certainties like job loss or long-term illness, both of which have been highly experienced during this pandemic period.
For instance, through a survey, APA Life Assurance found that this is a lesson many clients took to heart. In March 2021, 40 percent stated that they had an emergency fund in place. By September the same year, the figure had risen to 60per cent.
Diversify your investments
Do not put all your eggs in one basket, in case the basket falls down, all the eggs will break leading to a total loss. The same applies to investments and financial matters. The market drop in the wake of the COVID-19 pandemic has shown us the wisdom in diversifying our investments.
In recent months, some investments performed considerably worse than others. For example, travel-related companies such as airlines were struck harder than gold mining companies.
Some types of investments offer different characteristics such as income or dividends, and some types are by their nature less volatile than others, such as utilities (low) vs technology shares (high).
By putting a percentage of your funds into different types of investments, as you can through balanced mutual funds, for example, you minimize the chance that one economic event will harm all your investments equally. But if all you own are growth-oriented mutual funds or high-tech funds, depending on your situation, you may wish to expand your investments into different classes.
The retirement savings strategy
Generally, the retirement benefits savings plan should not be affected by fluctuations in the market. This is a lesson that people seem to have also learned over the pandemic period.
As of September 2021, the APA Life Assurance survey showed that a 61percent of clients stated that the pandemic had not changed their approach to their retirement savings schemes.
In reality, more clients added to their savings while mostly leaving their approach to retirement unchanged. Having investments to meet short-term goals means that investments to fund longer-term goals, such as retirement, can remain untouched and continue to grow.
Monitor your risk tolerance
The markets may have also played a role in raising your personal anxiety, so we should also talk about how you, the investor, may be reacting. Your level of worry has to do with how much risk you can manage, both in your investment plan and as a human with your money on the line.
Every investment carries some level of risk. While Guaranteed Income Certificates (GICs) carry less risk, they may not be enough to achieve the investment goal you want. On the other end of the scale, shares of junior resource companies can conceivably bring stunning returns but are hazardous as many fail to become profitable. Most investors should have a balance of investments to mitigate risk and align to their tolerances.
So, if you were comfortable with your investments during the recent market weakness, you may not need any changes to your investments. If you are still biting your fingernails, perhaps it’s time to settle on what investments make you feel comfortable through both good and bad times.