Keep Calm - But Don't Just Carry On! Your Guide to Improving Your Financial Resilience Amid Coronavirus Panic

Despite market commentators urging that remaining calm is the best policy to adopt in the face of financial uncertainty, human nature dictates that’s seldom your first response when things turn sour.

Arguably you don’t really know what your risk appetite really is until you face the prospect of losing what you’ve worked hard for.

But remaining calm is not your only option, you can – and should - take action.

While we’re told the chances of a full-blown outbreak in New Zealand are low, there remains the possibility Coronavirus could provoke a recession, or at least a short period of negative economic growth due to the impact on tourism and trade. That means you need to be preparing to weather the storm – or perhaps preparing to act on the opportunities the storm will uncover.

Let’s start with getting your own financial house in order, because not only will it make you more recession-proof, but it will give you the greatest chance of being able to act on this particular cloud’s silver lining.

The obvious place to start is with focusing on repaying debt. Higher debt puts you in a more precarious position, so you want to address that as fast as you can. In a recession how much cash is going out the door when your income drops is your biggest concern, so a delayed or lower repayment scheme should be considered if times get tough, even if it’s at a higher cost longer term. When it comes to repaying mortgage debt, you also need retain the ability to access that money again should you need it, so a revolving credit could be your friend here.

Take a minute to review your fixed mortgage rate or rates,because if the economy takes a hit there’s a greater chance rates will fall further. You might consider breaking your mortgage now and re-fixing when rates are lower, if a net saving could be achieved. (However, I’d temper that by saying the Official Cash Rate is not the only determinant of bank interest rates.)

Discuss with your employer what the plan is if you or a loved one contracted the virus or needed to be quarantined. If you have to isolate yourselves or the business shuts temporarily, can you work from home, will you use your sick to leave cover that period or will you have to take unpaid leave? Consider whether you have the funds at your fingertips to cover your costs for two weeks, in the event your employer can’t afford to pay you while you're in isolation.

If you’re approaching retirement, you should be checking your KiwiSaver settings. Those with plenty of time until they retire are generally able to ride out the ups and downs, but if it’s just around the corner for you, consider whether you have the runway, or the stomach, to continue with your current settings come what may.

It's worth getting a bit of cash out, perhaps a few hundred dollars, to have on hand. This is a good thing to have in your survival kit whatever the emergency – because getting to a cash machine or using EFTPOS isn’t always possible.

If people are going to panic-buy toilet rolls, then it’s also the time to consider what’s in your financial survival toolkit. Establish what expenses are essential and add them up, so you know how much you need to be able to cover if your income drops. If you can’t save a buffer that would cover those expenses for several months, consider what other options are available to you. Are there things you could sell quickly to raise cash? If need be, who could you borrow money from to tide you over (ideally without incurring the phenomenal interest rates charged by money lenders) Could you dramatically reduce costs by changing your living arrangements? It’s worth thinking about these things ahead of time, so you can quickly swing intoaction.

Whether the panic about the Coronavirus and its economic impact turns out to be founded or not, there are no downsides to putting yourself in a more resilient financial position.  

Hannah McQueen is the founder of enableMe – FinancialPersonal Trainers, a chartered accountant, Authorised Financial Advisor andpersonal finance author.

enableMe's Financial Person

al Trainers can help you put yourself in a more resilient financial position, able to ride out the storm or be ready to take advantage of opportunities. To arrange an initial consultation click here.

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