The Corona Crisis has an effect on everybody. Understandable, we are concerned about our personal and financial health.
How we deal with those unprecedented times depends on each of our personalities.
This article will give you 3 strategies how to deal with the financial worries in a rational way.
1. Modesty And Optimism
The first and most important thing for you is to consciously deal with the topic yourself and to classify the topic “Covid-19” according to your personal goals and philosophy.
If you are a young and healthy individual with no serious prerequisites and you work in a non-threatening environment, you most likely have a good chance to get through the crisis without a lasting effect on your health.
The same would apply to your family. Follow the health recommendation and stay home whenever you can. Eventually, this will pass and we all can return to a more normal life, whatever that will mean after the pandemic is over.
Taking care of yourself and minimising stress as much as possible, will help making rational and logical decisions when it comes to your financial situation.
2. Dealing With The Economical Challenge
You can view the economic impact from different point of views.
Let us start at the macro level. There is a potential for significant deterioration of the economy. We don’t know the concrete consequences at this level, but we have to be humble enough to understand that there will be a loss of jobs and purchasing power.
It most likely will be felt in almost all sectors – apart from short-term special effects.
Now might be a good time to put some rules in place. If yo have your own business, you have the control to act now:
- Check the fixed costs of your business and reduce them further if possible.
Reconsider any investments.
Consider the “Pareto Principle”, meaning 80% of your results should come from 20% of your efforts. Try to strengthen this principle by questioning the cost positions in particular.
- Questioning processes and identifying possible risks of failure.
This whole situation can be a good opportunity to develop a new awareness of processes and bottlenecks. Think about all the worst-case scenarios and examine which aspects you can influence and where you could take preventive measures.
- No panic and no ineffective “preventive” measures: Make it your mission to strengthen your company mainly through radical caution and cost-cutting measures to maneuver it through the potential crisis. Avoid emotional decisions.
- Estimate if you can benefit from the current situation in an ethical way. Meaning trying to gain market share through aggressive marketing or to profit from hamster purchases for a temporary peak in demand through large orders in selected niches, is not only a risky game, but also unethical. This can backfire and can also be very counterproductive.
- It should be clear not to panic, but and at the same time be aware of the worst possible scenarios without overreacting. Try to use the time you have to streamline processes or put new projects in place.
3. Liquidity And Long Term Planning
Most likely, the financial impact of the Corona crisis will happen on different levels:
- The private level:
You definitely want to make sure that there are no existential worries or difficulties in everyday life. Besides the support payments the government offers, there should be your personal emergency fund.
You should have a least 3-month worth of expenses covered, and this applies to regular times as well. An emergency fund is fundamental to survive a financial crisis, no matter if it is a global or personal one.
- The financial situation of self-employment
It does not matter if you run your blogging or any other business as a sole proprietorship or any other business form. The important part here is that you separate your business finances from your personal ones. You don’t want to run into a situation where you mumble everything together and lose control over what expenses have been paid from which funds.
Logically, for your business you need to have some cash reserve as well. Ideally, that would be 3-6 month of the amount of your operational expenses.
- Long-term investments: It is no secret that we all suffer from falling markets. Depending on your investments and portfolio it might be more or less. Well, patience and panic have only their first letter in common. Other than that, with patience you can outride the situation and recover at least a part of your investments, with panic you most likely will worsen the situation.
It is called long term investment! Don’t make short term decisions without all the information you need and can get from your professional financial adviser.
I am absolutely convinced that we all survive this crisis unscathed in terms of health and finances. At the same time, I see economic risks that will continue to concern us even after the virus problem has been overcome and that will affect us in one way or another.
But above all, I also see the current situation as an opportunity.
An opportunity to become more aware of our environment, our priorities and our processes.
Use this time to “revamp your house and your life” in a holistic way.
Purge, get rid of ballast and make room for new things in your life, for new daily decisions and processes in an independent way.