Corona proof your business finances...
During this period of time, I've compiled a list of suggestions on how to COVID proof your business finances. Read below my perspective on #FinancialLiteracyMonth and this current crisis.
Being debt free is priceless. Period. I have heard from a lot of people over the years that they are OK with having certain debt because they are “good” debts. Or that the interest rate is so low that it’s not mathematically worth it to pay off the debt early. The truth of the matter is that when a financial crisis hits, every dollar you have becomes precious for current needs – not for something that you purchased in the past that you may not own any more or are currently not driving or investing when you don’t have extra to do so.
Have a liquid emergency fund. I know there are some people that try to optimize their emergency fund by keeping part of it in the market and part of it in a savings account.
Stop trying to be cute and falsely sophisticated. This money is not supposed to make you money. It’s supposed to be insurance, a buffer, so that when a financial crisis hits, you aren’t scrambling for funds. Or praying that the government will swoop in to take care of you. Who knows if we get the second round of stimulus checks. What will bring a bit of ease will be having a liquid emergency fund to tap in.
There are no absolute recession-proof jobs or industries. I know that people will claim that their job or industry is recession-proof. The truth is that every recession looks different and can affect different industries more severely in each unique situation. Government budget cuts, natural disasters, disease, and financial market induced-recessions all affect industries differently.
Keep your basic lifestyle costs low. I am not saying not to spend your money and enjoy it. What I am saying is to take a hard look at what you spend on day-to-day lifestyle costs to see if how you are spending your money is really worth it. Would you still choose to have a 5,000 square foot house with all the maintenance costs that go along with it? Do you really need a brand-new car every five years? Do designer clothes and shoes really matter when you could have saved the difference for peace of mind?
No matter how bad the economy gets, you will pull through financially and come out on the other side OK.
I know it’s a scary time for a lot of people – not only financially but also health-wise as well. Being concerned about catching the coronavirus adds an additional layer of worry during an already stressful time. But I want to you know this – you will come out OK financially on the other side. Will it suck for a while? Yes. Will your net worth be affected by the market in the short term? Absolutely.
But I am here to tell you that I came out of this on the other side – still standing. I’m actually grateful for the tough times I went through. The knowledge I gained from the last recession put me in a much better place to make wiser financial choices in the future. And the financial lessons you glean from this recession will make you more resilient and financially prepared for what comes your way in the future.