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8 Financial Tips to Survive the Lockdown

By FA Elizabeth Irungu, CFA
13 April 2020

More than a third of the world’s population is on lockdown, thanks to novel Covid-19 virus. The pandemic has hit governments, corporate institutions, churches, charitable organizations, and households as a shock. No one saw the virus panning out as it has – vicious, devouring, indiscriminate and fear-gripping. More than any other time, humans are more afraid of dying of Covid-19 than any other illness. It is true that we can do something to avoid getting infected by the deadly virus but more to it we still must think about tomorrow – statistics show that the death rates from Covid-19 are below 5%, so the good news is, more people will recover and many will not be infected. This is where I ask, in what state (financially) shall you recover (most likely from fear) as you??

I want to share 8 financial tips that you can practice to win the lockdown!

  1. Assess your financial situation before following the herd. By this I mean, ascertain that you have cash buffer that can last you for the longest lockdown, we still cannot predict how long. Spare as much as you can in this very uncertain season. My advice is that let your savings work for you and draw-down on a need-basis; by this I mean consider having the funds invested in a low-risk liquid investment such as a stable money market fund, fixed deposits, treasury bills etc.

  2. Do not panic-buy Non-essentials. Working with a worst-case scenario, assess what is most critical for your family in this lockdown (when incomes loss is possible); between stocking toilet paper/sanitizers and buying dry grains/foods etc. Even if you can afford non-essentials today like sanitizers, drive-through meals etc. resist the urge.

  3. Manage your household expenses prudently. As a family agree on prudent household budget to overcome this unpredictable season. Remember we do not know for certain how long we’re gonna be in it. Don’t wait for the wallet to dry-out to then instigate budget cuts. This may cause a lot of distress to your loved ones. Be modest from the onset.

  4. If you are a tenant and work in highly impacted industries like airlines and hotels, consider moving houses to an affordable place or paying up several months of rent in advance before allocating monies to other expenses. This will spare you extra strain on your savings and which can carry you till the economy re-opens.

  5. Avoid new debt by all means. With a lockdown there’s increased temptation to use more of everything, data bundles, air time, entertainment subscriptions, in-house bars, online purchases etc. The lure for quick mobile loans, credit card loans etc. becomes an attraction in order to please Jones. Exercise discipline not to live above your means.

  6. Postpone projects to the foreseeable future. Perhaps you had intended to have a home makeover with your current savings or a loan. This is a capital cost that may drain your cash reserves and expose you to undue financial stress. If you have unused loan drawn-downs already, my recommendation would be that you invest the funds in a capital preserving investment plan awaiting the uncertainties in the market to die down. By investing, you cushion yourself from interest costs which will continue to accrue with the interest earned from the same funds.

  7. If you are a financial markets investor, you may have seen by now that global markets have gone through a meltdown. Your investments (especially in equities) have lost value at an unprecedented rate in the last two weeks. To give you some color Nairobi Securities exchange 20 share index was -25.89% as at 9th April 2020. In short investors have lost more than a quarter of their invested capital. I urge you not to panic. In such volatile times investors may overreact to the loads of news hitting the markets. If you are a long term investor “stay the course”. This season can present an opportunity to buy low and cost-average your portfolio. Darkness will fade and the light will dawn. Nothing lasts Forever.

  8. Take time to learn more about investments. There are many sources of authentic information about investments. If you have a personal financial adviser, it’s time to mine all knowledge from them. Don’t be afraid to ask even the most basic questions. Besides, information is power.

As we all battle with the new normal of doing things, staying and working at home let’s not forget that when the storm finally calms down we must dust ourselves and match forward with confidence. Let’s practice!

“You can't stop the future; You can't rewind the past; The only way to learn the secret ... is to press play.”

Jay Asher, Thirteen Reasons Why

FA Elizabeth Irungu is a full member of the Institute of Certified Investment and Financial Analysts and the GM, Business Development & Client Services at ICEA LION Asset Management Limited.