finance

5 ways to manage your finances during the COVID-19 pandemic

The coronavirus has set us back in more ways than one. Economic destruction lies in its wake. Financial experts estimate that recovery could take a year or more and financial accounts of many people have already taken a hit, as stock markets have plunged over fears about the economic effects of the virus. How do we manage our finances in these times?

Rough times probably lie ahead for many sectors and industries affected by the pandemic.

Here are several ways to try and brace yourself for the current economic storm, and manage your finances for a stronger comeback.

Go for cash

Investments aside, you might want to think about holding enough cash for basic needs (taking out some of your assets and turning them into cash could prove beneficial). Think in terms of two cash buckets: The former to carry living expenses worth one year. The second is for the big contributions you’ll need in the next five years, such as assisting with college tuition for a grandchild.

With the money already set away in those buckets, you may be better equipped to ride out a shaky market more easily, using your investment portfolio’s returns to replenish the buckets while using the cash you really need.

Be wary of emotions in the market

Note that when the market jumps 800 points and then drops 2,000 points and then reverses in the course of a week (or a day) that logic has gone from the market and emotion has taken over. Best to just sit back and wait for things to calm down. This means that your usual investment activities may have to slow down or stop altogether (possibly just for now), reflecting a defensive or conservative approach.

Emotions are the enemy when it comes to managing finances. It’s time to think rationally and practically. It might be better for you to try and fight impulsive decisions (like trying to pick the market bottom or the turnaround to jump in). It’s tempting to think you can, but you probably can’t.

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Control your finances and keep daily expenses under control

Aside from investments, your financial stability also needs to be looked at on a daily basis. Don’t panic, don’t hoard supplies and food unnecessarily and don’t make any other irrational purchases at the moment. It’s important that you keep a cool head. Don’t panic buy food items and other groceries because your government is probably carrying out initiatives for essential services. With the effort of the authorities, your supply of the basics is probably still fine. So, don’t overspend on fruits, grain, vegetables and meat. Get what you need and have a little faith in the system. If you don’t, you might be contributing to the dilemma of panic buying and burning a hole in your finances as well.

Prepare emergency funds

At times like this, you’ll probably be glad that you set aside some extra cash in emergency funds. If you don’t yet have an emergency fund, now may be the time to start considering it.

According to TIGER 21′s fourth-quarter report, investors have positioned themselves to survive financial uncertainty for as long as four years without having to liquidate their assets by creating a broad cash buffer.

Emergency funds are usually investments that aren’t touched unless critical situations come up. They often include up to six months worth of expenses. Consider parking your cash in liquid assets so it can be redeemed when needed.

Invest with your age in mind

If you’re a retiree, now may be a great time to look at asset allocation to try and ensure that you have ample fixed income to bond exposure, which in times like these may behave more like a ‘war chest’.

Many investors are enthusiastic about the prospects of “buying the dip”, or investing in stocks while the price is down. Retirees may have some savings and this is actually a good time to put some spare money to work. This recommendation refers mainly to long-term investors. One way to do this is by dollar-cost averaging, which is just a fancy way of explaining putting capital at regular intervals in investments.

With a long term approach to managing your money, certain precautions and steps may be needed in uncertain times. Having cash, playing cool and taking care of day to day expenses can help you weather this financial storm. You may even come out of it in a better position than you were before.


Hampton Wealth specialises in sourcing high quality, listed bonds and funds with a focus on providing returns in excess of normal off the shelf investment options.

Find out more at HamptonWealth.com

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