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23.03.2020 Feature Article

Strategic Personal Finance Amidst COVID-19 Pandemic

Strategic Personal Finance Amidst COVID-19 Pandemic
LISTEN MAR 23, 2020

COVID-19 is causing economies shut down, businesses lose profit, is this the best time to trust in the financial sector? Is this a good time to invest in stocks? Is there light at the end of the tunnel? Can my personal finances survive my country’s lockdown for 6 months of no productive activities? The locking down of countries even in the EU for example Italy, etc and the strict measures put in place in other countries to be able to minimize the spread among other things, has led to the shutting down of some companies and slow movement in economic activities.

World Bank, schools, businesses, and even the government’s budget for 2020 has been affected by this; we see a lot of countries financing their health sector with huge funding. According to the World Bank, “the Boards of Directors of World Bank and IFC on 17th March 2020 approved USD 14 billion 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 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 traveling across all the continents in the world in currently 184 countries as at 20th March 2020.

One of the importance of personal finance is to shield us in times of uncertainties like this. Most individuals are getting hit and some will get hit in the few days to come as some other countries will declare a lockdown and a state of emergency. Some organizations 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 funds 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 You Do?
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 know which expense you cut off to save up some more. With those with an already existing budget, you will have to review the budget to make provisions for groceries you will need should your country declare a lockdown or state of emergency.

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 for the financial sector, the proclivity of 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 the banks to not make their ATM run out of cash. This is because these institutions are the safest ways of saving money even compared to one’s preferred personal tool like the safety box or piggy box.

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 the stocks of many investors with some stock markets almost crashing and experiencing something like the 2008 financial crisis. For example, the New York Stock Exchange, Shanghai Stock Exchange, London Stock Exchange, just to mention a few. On 18th March 2020, the U.S Stock market to halt trading for 15 minutes. 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 normalizes. However, not all stocks are good so the selection of the stock must be done with expert advice.

The role of drafting a new budget and reviewing an old one plays in strategic personal finance cannot be over emphasized. Trusting the financial sector as well as investing in the stock markets will go a long way to cushion us in times like this and in the future.

Enoch Dzah
+233 241603589
[email protected]

Enoch Dzah
Enoch Dzah, © 2020

Enoch is a CFA Level 1 candidate who holds the Securities Course certificate from Ghana Stock Exchange. He is a graduate from the University of Cape Coast where he studied Bachelor of Commerce (Finance). He currently works with a multinational bank. He is a Pastor and a Financial Literacy AdvocateColumn: EnochDzah

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