The Coronavirus pandemic is spreading and causing havoc around the world. Thousands of people are dying every day and several governments have announced strict lockdowns. At the same time, the economic damage is devastating. More than 3 million Americans filed for unemployment benefits in the US last week. This is the highest number ever recorded and it could get worse as more companies file for bankruptcy. The financial tips in this article will help you cope with the effects of the pandemic.
The Coronavirus pandemic came at a time when the US was going through an economic boom. Wages were rising, the unemployment rate was at a 50-year low, jobs were increasing, and there were more jobs than applicants.
As all this was happening, irrational exuberance in the financial market was increasing. As a result of low interest rates, people were borrowing money at record pace. Today, in the United States, auto loans total almost $1.2 trillion while the amount of debt in credit cards is more than $0.9 trillion. Companies too were not left out. In the past decade, companies increased their debt to more than $15 trillion.
Therefore, with many people expecting to be laid-off and with most of them heavily in debt, the challenge is on how they can survive. In this article, we will look at some of the best Coronavirus financial survival tips.
Many people’s financial well-being will be disrupted during this crisis. Many, who have been laid-off will struggle to pay their bills. Similarly, others who have had their wages slashed will find it difficult to maintain their previous spending habits.
Therefore, the first important Coronavirus survival tip is to embrace financial budgeting. This means looking at your financial habits and making cuts where you can. For example, more than 60 million people in the United States subscribe to Netflix. Millions of others subscribe to Amazon Prime and Disney+. In essence, most people rarely have the time to watch these shows. Therefore, as part of your budgeting, you can decide to do away with an unessential service like Netflix, Amazon Prime, etc.
There are many other options you can reduce. For example, you can move to a smaller and more affordable house, swap an expensive car with a cheaper one, and also sell items that you don’t need.
Another fact about Coronavirus is that the economy will come back to life. In the past centuries, we have seen several big financial crises. During these crises, people tend to feel like the world is coming to an end. However, this is usually not the case and the economy tends to rebound. The same will happen a few months after the pandemic ends.
Therefore, if you still have a job, we recommend that you also focus on having other side gigs, which will bring extra income. Fortunately, there are many options that you can start today. For example, you can sell products on Shopify, create a YouTube channel, and taking gigs from Upwork and other freelancing platforms.
After budgeting and making money, the most important thing you can ever do is to invest your money wisely. Fortunately, there are many affordable investment options that you can chose. Let us look at some of them:
Before the Coronavirus crisis, Bitcoin was trading at more than $10,000. As people exited their Bitcoin investments, the price declined to about $3,200. As I write this, a Bitcoin is selling at more than $6,500. This is a 50% return to people who bought at its lowest level this year.
Fortunately, Bitcoin rally is just getting started, and there is a possibility that it will trade above its highest level since 2017. I base this observation on several factors. First, with Fed printing money in large quantities, there are chances that inflation will happen. This will see more people moving to assets like gold and Bitcoin. Second, halving is happening between May and June. This too will have a positive result for Bitcoin. Third, more investors are starting to move to Bitcoin as its adoption rate continue to rise. Therefore, if you invest in Bitcoin today, chances are that you will be at a better position in days to come.
A fact no one can dispute is that stocks were expensive before the crisis. At the time, some loss-making companies like Beyond Meat, were trading at ridiculous price-to-earnings ratio (PE). I guess, WeWork too would have received such valuation if the management didn’t bungle its IPO. Today, while many companies are still expensive, some valuations can now be justified.
We recommend that you invest in three types of companies. First, for regular income, you should invest in dividend-paying companies like Leggett & Platt, AT&T, and Comcast. These are high quality companies that pay their investors well. Second, another part of your portfolio should have growth companies. These are companies like Slack, Zoom Video, and Cloudflare that are not yet profitable but showing a lot of promise. The benefit of investing in these companies is that their stock prices tend to outperform value companies.
Third, you should invest in large technology companies that will soon start paying dividends. Some of these companies are Google, Facebook, and Nvidia.
If you can’t select individual stocks, we recommend that you focus on large diversified mutual funds, Exchange-traded funds (ETFs), and index funds.
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Commodities are other areas you can invest your money. But, you need to be careful here. Investing in commodities like soybeans and corn is a bit risky and the risk-reward ratio is not worth it. Instead, you should invest in precious metals like silver, gold, and palladium that do well when the dollar is weak. On this, you can invest in their contracts for difference (CFDs) or their ETFs like VanEck Vectors Gold ETF.
Another area you can allocate your money is in peer-to-peer lending. Sure, the industry has its challenges, but the reality is that it is here to stay. The industry will likely benefit from low interest rates that we are in. With rates so low, many people will not prefer to save. At the same time, I don’t expect banks to lend more money to people at these rates. The end result is that many people will turn to P2P platforms to borrow money. Some of the best peer-to-peer lending companies you can consider are Lending Club and Prosper Marketplace.
Surviving the Coronavirus era will not be an easy thing for many people especially those who have lost their loved ones. Still, by following tips in this survival guide, it is possible for you to not only make it but to thrive.