Pattie Lovett-Reid: As COVID-19 spreads, take control where you can
The coronavirus has rocked our world. As fear mounts on a personal level with experts emphasizing social distancing, working remotely if possible, washing hands and disinfecting surfaces regularly to name a few, we all are on heightened alert.
There will come a time when we may compound our heath fears with our financial fears, and it is the one-two punch we haven't had to deal with and simply don't have a playbook for.
Small business are struggling and cutting back hours, many part-time employees have been put on notice, and some companies fear it is only a matter of time before they have to shut down due to lack of cash flow and high overhead costs. This is serious, emotional and unpredictable.
So as we all work through this crisis together, I think it’s only prudent to control what you can.
Here are some tips for investors:
1. Be realistic and expect the volatility to continue until we have more clarity around the virus, and the number of cases and fatalities start to subside.
2. Experts are predicting the situation will likely get worse before it gets better. But when it does get better, the markets will likely rally to the upside. The challenge you have is to be patient and understand the fear you are experiencing is real.
3. In 2008 during the financial crisis, markets dropped 50 per cent, and over time came back. However, if you have to sell your stocks to make ends meet, do what you need to do for your family.
4. Realize when investing in the market, companies that are leaders in their industry, pay a dividend and have strong balance sheets with manageable debt will also get through this crisis.
On a personal level:
1. Households need to prepare for non-essential services to be on lockdown over an extended period of time. It may not happen but it could.
2. Be razor-sharp on what your expenses are over a two, or maybe three-month period.
3. Pull back on discretionary spending.
4. Get clarity around your company's salary policy if you become ill and have to stay home.
5. Interest rates have been lowered by the Bank of Canada, so get to know your numbers in terms of reduced mortgage payments, loan payments etc. Expect the banks to provide clarity on this in the coming days. You might consider asking for mortgage payment relief for a month to free up cash flow.
6. If you are having trouble making ends meet, reach out to all your creditors and request temporary relief. You are not in this alone.
7. Look to negotiate all contracts and possibly suspend contracts and memberships where you can
8. These are the times when your emergency fund comes into play. Best if never used but invaluable if needed. If you don't have a cash reserve, reach out for a line of credit or use a credit card over a pay day loan, which have huge associated costs.
9. Turn to family for temporary financial help.
10. Try not to panic. Blaming doesn't help, and in crisis, clarity and control over what you can is always better than fear.