We live in a time of increasing threats from infectious diseases that can disrupt society, the workplace, and the markets that we depend on for financial security. In times of uncertainty, it’s important to take a measured approach to financial decisions. The following six tips will show you how to preserve your financial wellness during unpredictable times.
1. Review the risks.
A basic understanding of the nature of infectious diseases can help you assess their health and financial risks. Viruses have differing means of transmission that affect their rate of spread and differing symptoms that affect the rate of mortality. Vulnerable populations such as older patients and those with pre-existing conditions have more to fear from these diseases than normal healthy adults.
Public health officials estimate the mortality rate of the coronavirus at about 0.6%. That is six times the death rate from the flu during a typical season. By comparison, the mortality rate of H1N1, a type of flu commonly known as swine flu in the U.S., was in the range of 0.02 to 0.03%. As populations become immunized to infectious diseases, either through natural exposure or vaccination, the mortality rates of those diseases invariably drop.
2. Invest in the stock market.
Historically, markets recover quickly from threats to public health after an initial period of volatility. That trend has made the waning months of a pandemic a good time to consider investing in the stock market. The SARS outbreak in 2002 and 2003 resulted in an initial loss of 14.66% for the S&P 500, but an overall increase of 12.23% from November 2002 through July 2003. Similarly, an outbreak of H1N1 caused an initial drop of 12.02% in the S&P 500, but a net gain of 37.54% from April 2009 through May 2010. The market followed a similar down-and-then-up pattern during the coronavirus. All of these outbreaks lasted at least one year, caused early double-digit drops, and resulted in eventual double-digit net gains.
3. Start or maintain an emergency fund.
If at all possible, you should always accumulate enough savings to cover at least three months of living expenses. This strategy can cover the lost wages resulting from sudden unemployment, which is commonplace during recessions and other economic downturns.
Unexpected emergencies can cause the additional problem of supply shortages. The prospect of quarantines during infectious disease outbreaks increases the demand for cleaning supplies and personal hygiene items, which already may be in short supply as a result of panic buying and third-party marketers. Consequently, prices on some groceries and household products will skyrocket. An emergency fund can help cover these unexpectedly high expenses, and it’s never too late to start saving for one.
4. Review your budget.
It may be necessary to review your budget to cover additional emergency-related expenses. Look for places where you can cut expenses and, if possible, put the extra savings in your emergency fund account. If you have budgeted money for entertainment, that is a convenient place to look for savings since venues like sporting events and restaurants may have to curtail operations. It’s much easier to identify areas where you can reduce expenses without sacrificing necessities once you see all of those budget items in one place. If you don’t have a budget, many online resources for developing one are available.
5. Ask about your mortgage.
Homeowners who are struggling to make their monthly mortgage payments can look into the provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provides legislative relief for homeowners with mortgages backed by Fannie Mae, Freddie Mac, FHA, VA, and the USDA. Specifically, the CARES Act prevents lenders from foreclosing on delinquent loans until at least Dec. 31, 2020. In addition, homeowners who experience a financial hardship due to the coronavirus pandemic may have a right under the new law to request that their mortgage payments be paused or reduced for an initial period of 180 days and an extension of 180 days, after which time the payment amounts that were missed will have to be repaid. Repayment terms will vary by lender, so be sure to inquire.
6. Avoid overspending.
It’s a natural reaction to buy more than you need if you expect shortages or home isolation that may restrict your ability to make purchases. However, panic buying is rarely justified, as manufacturers are capable of adjusting their supply chains to compensate for the increase in demand. Furthermore, buying more products than you’ll use within a reasonable period of time can cut into your savings at a time when you may need the money for daily living expenses.
Public health emergencies may continue to cause financial upheaval in the years ahead. It’s important to take reasonable actions in response to real threats rather than succumbing to reflexive behavior. Careful thought is essential for preventing your finances from becoming significantly weakened over the long term.