The year 2020 will go down in history as the year when the Covid-19 pandemic
happened.
Many have gotten sick. Many lives have been lost. Businesses have been disrupted. The world economy and the Philippine economy are reeling from the adverse effects. Finances have been hit.
While people are on quarantine, it may be an opportune time to reflect in terms of the way forward in personal finance. Taking stock of the financial situation and planning for the future are key to sustained personal finance recovery.
We need to continue remembering that we have a financial goal to achieve. It is what should guide us in terms of how we live our respective lives. It is what should guide us in terms of identifying what our priorities in life are. It is what should guide us in terms of how we handle money.
It is said in economics that there is no such thing as a free lunch. Thus, achieving our financial goal will not be a walk in the park. If we are to eventually achieve our financial goal, we have to be ready to overcome adversity at all times.
We need to continue maintaining a healthy stream of cash flows. Cash is king especially when there is a pandemic. Our cash inflows must be able to support our cash outflows sufficiently.
Since raising cash inflows may be a challenge owing to the irregular operations in the economy, we will find valuable use in the emergency fund. It will hopefully help us keep afloat while there is the pandemic.
Proper budgeting will likewise help us manage our cash outflows. Now more than ever, we have to live within our means.
We need to stop bad habits in spending. We need to be more conscious about the difference between needs and wants.
In terms of priority, money should be devoted first to the fulfillment of basic needs like food, shelter and clothing before it can be allocated to wants. Spending for needs can be minimized. Spending for wants can be minimized or removed.
In the time of the pandemic, we should responsibly buy the items that we need along with reasonable quantities of each. Every peso saved is a peso earned.
We need to start reviewing our state of financial protection.
The emergency fund should be equivalent to at least six months to one year of our monthly lifestyle spending. It should be placed in liquid assets that are accessible.
Our life insurance policy must be adequate enough to cover future developments like death, sickness and retirement. It should take into account both family size and projected future family lifestyle. There should be insurance as well for crucial assets like our house and vehicle given uncertain times.
We need to start reviewing our investment portfolio. While the financial goal should be constant, the investment mix must be flexible. A good combination of past performance and expected performance can be used as the basis to decide on where to invest.
Past performance can show how investments are able to weather the storms. Expected performance can show how investments are projected to evolve. Information is the new oil and this is what we need in order to make the right investing decisions.
From a nation-building perspective, we need to actively collaborate with government in helping rebuild our economy. The nation is our business. Economic growth is a concern for everyone.
All of us have to contribute. Maybe, a part of our budget can be allocated in helping those who are in need. Maybe, a part of our time can be devoted in planning and executing relief solutions based on our areas of expertise.
When there is darkness, there is an opportunity for the light to glow brightly. During uncertain times, we need to have the positive mindset to rise above adversity.
During uncertain times, we need to have the resilient spirit in handling trials by working with more purpose and working harder. In a way, the pandemic can prompt us to discover the best version that we can be and lead us to sustained financial recovery.
Gemmy Lontoc is a registered financial planner of RFP Philippines. To learn more about personal financial planning, attend the 82nd RFP program this May 2020. To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.