Strategic personal finance amid COVID-19 pandemic


Can your personal finances survive your country’s lockdown for six months with no productive activities? The locking-down of countries, even in the EU, and the strict measures put in place for other countries to be able to contain the spread, among other things, has led to the shutting down of some companies and slow movement in economic activities.

The World Bank, schools, businesses – even government’s budget for 2020 have been affected by this; we see a lot of countries financing their health sector with huge funding. According to the World Bank: “Boards of Directors of the World Bank and IFC on March17, 2020 approved a US$14billion package of fast-track financing to assist companies and countries in their efforts to prevent, detect and respond to the rapid spread of COVID-19”.

Indeed, the impact coronavirus (COVID-19) has had on us globally makes its influence on the personal finance of individuals evident. The first case of COVID-19 was recorded in November 2019 in Wuhan, China. It has succeeded in travelling across all the world’s continents and was in 184 countries as of 20th March 2020.

One of the important qualities of personal finance is to shield us in times of uncertainty like these. Most individuals are getting hit, and some will get hit in the few days to come as other countries declare lockdowns and states of emergency.

Some organisations will not pay salaries in this situation, and some will be forced to shut down and never operate again – leading to an increase in the level of unemployment. Individuals will be forced to rely on their savings and reserves until they get employed again. The situation will also cause people to use a large proportion of their saved-up capital to buy groceries and toiletries.

The importance of personal finance can easily be downplayed due to the current situation in the world, because it feels like the world is crashing down on us.

What can one do?

  1. Draw or review your budget

A crucial step in personal finance is drawing and reviewing one’s budget – knowing where your inflows are from and where your outflows go to. You want to be able save up some money and to invest it in the nearest possible future.

Listing down your expenses against your income makes tracking the items easier and helps to show which expense you should cut off to save up some more. For those with an already existing budget, you will have to review the budget to make provisions for groceries you’ll need should your country declare a lockdown or state of emergency.

  1. Trust in the financial sector

One can easily think the world is falling apart, which might be true – but your savings are still safe with the banks and other finance companies. When you lose trust in the financial sector, the chance you will have a proclivity for panic-withdrawals is high – thus making you vulnerable to impulsive spending.

The Bank of Ghana has advised the public against panic-withdrawals in the face of COVID-19 because it has measures in place to control the loss of customer deposits, and has instructed banks to make their e-channels available and tasked them not to let their ATMs run out of cash. This is because these institutions are the safest way of saving money even compared to one’s preferred personal tool, like a safety box or piggy-bank.

  1. Invest in good stocks

COVID-19 has significantly affected major stock markets and stock market indexes across the world. This has led to a loss in the value of stocks for many investors, with some stock markets almost crashing and experiencing something like the 2008 financial crisis. This also caused the US stock market to halt trading for 15 minutes on March 18, 2020. The Ghana Stock Exchange has seen its own share of the downtrend.

As risky as it is, the stock market gives an average return more than any other form of investment in the long-term. Many people often think about short-term investments like Treasury-bills, fixed deposits, etc. In as much as the above investments are good for those who are risk-averse, as well as those who may need their money in the shortest possible time, one must invest in stocks for the best long-term return.

Warren Buffett once said: “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful”. This is the time to be bullish, as others are afraid of the stock markets crashing. The stock prices are averagely lower, and will surely rise after the pandemic situation normalises. However, not all stocks are good; so, selection of the stock must be done with expert advice.

Drafting a new budget and reviewing an old one has a great role to play in the fight for our personal finance. The trust we have in our financial sector as well as investing in the stock markets will go a long way to cushion us in subsequent times like this in the future.

>>>The author is an investment professional, a financial literacy advocate and a pastor. He is a CFA Level 1 Candidate and holds the Ghana Stock Exchange Securities Certificate. Email: [email protected]: Contact: 0241603589



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