What is the state of your finances in the time of the COVID-19?

Fear of the effects of the virus caused a rush to purchase food, and items to sanitise and clean for those who could. Unplanned spending whether with a credit card, dipping into savings, or using monthly salary will have implications. Government has tried to ease the fallout from restrictions caused by COVID-19 with various measures finance.gov.tt/2020/03/19/covid-19-updates/ but the reality is bills still have to be paid and groceries bought despite no apparent end in sight to the current predicament. Before COVID-19, TT was in already in a precarious state with low oil and gas prices.

Financial Counsellor, Consumer and Management Advisory Services Limited, Patrick Lewis said panic buying is triggered when many people suddenly buy as much food, toiletries and other items they may deem necessary because they are worried that something bad may happen. This type of spending, using credit cards or drawing down on savings, puts their future spending power at risk if money allocated for regular and future monthly expenses was used. Persons can find themselves, “unable to meet their normal monthly commitments”. Lewis shares a few pointers on adjusting your sails in the midst of the present rough financial waters.

He said, budgeting is key to opening the door to financial freedom.

Step 1: Prepare a personal budget sheet along with personal assets, and liability listings—this gives an indication of monthly income and expenses, how much is “owed” and “owned”.  Lewis said, “This diagnoses your financial health as of now”.

Step 2: Deciding which bills should be paid. Priority should be given to food, mortgage, rent, loans, life insurance and credit card. Paying the credit card means further access to cash. Lewis identified areas of “adjustments”.

Payments to annuities can be temporarily stopped. Lewis said, “Most are flexible and payments can be stopped and continued once the immediate financial situation is rectified. Another area of adjustment can made in WHAT and HOW purchases are made. Identifying the essentials and non-essentials assist in changing the mindset of WANTS vs NEEDS”.

He suggests looking for cheaper priced goods rather than shopping at the usual places. COVID-19 has caused a nationwide lockdown with the closure bars, restaurants and popular liming spots. This means that individuals will be spending less on entertainment, travel expenses due to “work-from-home” programmes this period. Lewis said, “It is advisable whatever is saved during this period could be used to offset debts or create an emergency fund for unforeseen expenses.”

A perfect storm of conditions—COVID-19, slowdown of the economy, lower gas prices, high cost of living and food prices—face us. Lewis said it is “crunch time” and all are susceptible to these vagaries. He said the time had come for people to be creative. He suggests, “establishing small buying clubs either between families or friends is a solution to explore. This will enable bulk buying which can be redistributed among members thereby reducing the cost of the monthly shopping”.  Consumers can exercise their spending power by shopping around for cheaper prices in groceries to counteract high food prices.

Lewis said, “We have grown accustomed to a sedentary way of life that sometimes we lack the capacity to change our circumstances.” What about returning to the “real market” to supplement the grocery bill? “Finding bargains should be pursued. Shopping in the market gives the option of eating what is in season and opportunity to eat ‘fresh’ and healthy. Since most of the food is imported, and we are wont to choose the imported rather the local. Buying local allows for foreign exchange to remain in the country,” Lewis said.

Increased demand for limited goods can prompt higher prices or ‘price gouging’.

He advises that changing how we shop can create substantial savings which can be used to build a reserve that can supplement other areas of our budget.

There are pros and cons to managing money at this time:

PROS:

1. Builds a personal and family understanding of the difference between WANTS and NEEDS.
2. Develops planning and management of finances.
3. Helps to budget effectively by forecasting expenses that are staggered during the year, for example water, electricity, motor insurance and back-to-school supplies.
4. Learn to live within the income earned.
5. Shop for cheaper alternatives without comprising quality. Buy local.
6. The importance of saving and creating an emergency fund to combat future the fallouts. 

CONS:

1. Uncertainty of the reopening of businesses thus hindering income therefore affecting salaries.
2. Job losses/unemployment.
3. Increased anxiety
4. Unable to save effectively, not knowing how long the quarantine will last.
5. Not saving but using savings to fund day-to-day expenses.