The Pandemic's Impact On Personal Finance Management

The impact of the global pandemic has varied in significance, depending on a number of factors. Nonetheless, its effects on household finances will continue to be felt for years to come. Your financial stability may hinge on your preparedness to mitigate these effects. 

The Effects on Worldwide Economies

Many household budgets have already been impacted by COVID-19. From the disruption of travel affecting international trade to the cancellation of religious gatherings and sporting events. We are witnessing increasing levels of unemployment as many businesses either close or reduce staffing.

The world‘s economy has truly been shaken up. Longer-term economic recession is a global reality, following this somewhat sudden economic contraction. Countries are bracing for even higher unemployment figures, falling wages, and increased competition for the fewer jobs available.

Changing Spending Priorities

Months of social distancing and lockdown have forced consumers to shop differently. They are reassessing what is essential and opting for online shopping rather than the checkout line. The next year or two will mean less disposable income for many households. This may be due to unemployment or reduced work hours.

More affordable items may become an upward trend, although consumers in the U.S. still currently favor the bigger brands and online shopping brands are enjoying massive revenues. In fact, prior to the pandemic, the U.S. economy was characterized by general stability. Post-pandemic long-term recovery is actually likely. However, the short and medium-term ripple effects are unknown.

The Impact of Remote Working

What we do know and recognize is the shift to people working from home, causing a re-think of employee benefits. Some companies like Uber and Google have permitted staff to work remotely into 2021. Other companies are embracing remote work in varying degrees.

In order to attract and retain talent, employers are trading traditional in-office perks for flexible scheduling as well as retirement and health insurance benefits. Even prior to the pandemic, a 2015 Glassdoor survey showed that four in five employees favor additional or new benefits to a pay raise. This is an impressive reflection of shrewd personal finance management by the modern worker. In fact, more intentional and structured planning is clearly warranted.

The Need For Goal-Oriented Planning

The sudden upheaval of COVID-19 has been a wake-up call on both the personal and public front. It has made room for goal-oriented planning to mitigate financial losses. Yet, retirement and personal insurance planning are not the only considerations in this regard. You may need to consider the following.

If you lose your business or job

● How can you manage your mortgage payment better?

● In what ways can you reduce your current expenses and save more?

● Ask yourself if you can build up 3 to 6 months’ worth of savings for unexpected events, such as fallouts from a pandemic.

If your house-hold breadwinner or dependents fall ill

● Have you looked at the detail of your insurance cover?

● What would you be entitled to and for how long?

● Is it clear to you how you would make a claim?

● Have you considered the exclusions that will not cover you?

It’s imperative that individuals have solid plans in place to allay fears arising from curveballs such as a global pandemic.

As surely as this pandemic started, it shall come to an end. In fact, certain aspects of economies have been known to perform even better post-recession. It may be too early to tell what a post-COVID-19 world will look like, but planning ahead will go a long way to soften the blow on personal finances.

Experts are here to help, don’t hesitate to reach out to a Financial Advisor.

By: Modesto Gutierrez Porrero

Wealth Manager & Financial Advisor

The Wealth Master

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