The economic and financial impact of the COVID-19 pandemic has been undoubtedly significant, but most news headlines tend to focus on the stock market and financial health of corporations rather than that of individuals.
Despite the U.S. government introducing the largest stimulus package in U.S. history to help workers and businesses most affected by the pandemic, research shows that the financial impact of the pandemic on the average American has been very drastic.
Some key highlights of the financial impact of the pandemic on the average American include the fact that:
- A record 39 million people have filed for unemployment within a two-month period.
- More than 100,000 small businesses have shut down permanently due to the pandemic.
- A rise in the number of Americans unable to pay rent; about 20 percent of people missed their monthly rent payment on time for May.
It hasn’t helped that:
- 51 percent of people have had to dig into their savings account or emergency fund.
- 63 percent of people are worried about running out of money.
- 88 percent of people who recently lost their jobs are worried about emptying their bank accounts.
These stats reveal a key fact: things have gotten a lot more difficult for many people financially, and, depending on how long the pandemic lasts, the associated financial challenges could persist for a much longer period than anticipated.
Below are ways you can protect yourself from the financial impact of COVID-19:
- Get In Touch With Your Service Providers to Request an Extension on Your Payments
Due to the scale and far-reaching impact of the COVID-19 pandemic, there is a huge possibility that your service provider (including landlords, lenders, and other creditors) have already introduced a provision to allow for deferment of your payments or a more flexible payment schedule while the pandemic lasts.
Even if there hasn’t been a public announcement from your service provider to this effect, a provision most likely exists. You might want to reach out to them to explain how your finances have been impacted by the pandemic and how this is likely to affect your payments.
You can also try to renegotiate existing arrangements or ask to be allowed to make reduced payments while the pandemic lasts.
- Embrace Frugality and Limit Investments
While the people most affected financially by the COVID-19 pandemic are those who do not have savings and those who have very little savings, it is important to realize that people who have savings aren’t completely immune from the financial impacts of the COVID-19 pandemic.
We’ve slowly come to the realization that the pandemic is going to stay for the foreseeable future, and while economic activities are gradually being resumed, some experts are predicting a second wave of infections: even if you have savings, it is important to realize that things are NOT as they used to be, and the likelihood of a long recession is very high.
If you have savings and are also able to benefit from the stimulus package, you might be under the illusion that you are financially secure. As a result, you’re likely to continue to spend as you were doing before the pandemic.
Don’t make this mistake. This is not the status quo.
Try to limit all unnecessary expenses, embrace frugality, and be very careful about how you invest your money right now.
- Actively Work on Having Other Sources of Income
If there is one thing the coronavirus pandemic has proven, it is that there is nothing called job security.
People have lost their jobs in record numbers due to the pandemic, and data shows that people in poor households are mostly affected: a whopping 39 percent of people in households that earn $ 40,000 or less have lost jobs due to the pandemic.
If there’s one lesson you will take from the COVID-19 pandemic, let it be this: don’t ever rely on just your job for income. Instead, actively work on having one, two, or more sources of income.
There are several ways you can generate a side income: even though the gig economy has been severely impacted by COVID-19, other forms of gig work that rely on the use of the internet continue to thrive. You should consider freelance writing, programming, web development, and other freelance work you can do online. You might also want to look into starting a blog.
- Take Out a Personal Loan
Many people are currently in a situation in which they are completely dry financially, and there’s just no hope of being back at their jobs anytime soon. When you factor in other commitments, you might not have an option besides taking out a personal loan.
Taking a personal loan should be addressed with caution, however.
You should generally avoid taking a personal loan for investment purposes (especially during volatile times such as this one!) and without having significantly adjusted how you deal with your finances to cope with the current reality of things.
You should also pay very careful attention to the annual percentage rate (APR), or the lowest total interest rate, that comes with the personal loan options you’re considering. While there might be an abundance of personal loan offers at this time, not every available loan is good on the long term: some of the best personal loans have an APR as low as 4 percent while some personal loan options have APR as high as 40 percent. You should carefully analyze the APR of the loan you’re taking (especially if you’re taking the loan to pay a debt or another loan) to avoid putting yourself in more debt than you had initially and potentially jeopardizing your credit score.
- Pay Even More Attention to Your Savings Right Now
While things are generally bad right now, they could get worse: experts are predicting a second wave of COVID-19 infections and there’s a very high possibility that we have a long recession looming.
Things could get a lot more serious financially for the unprepared.
Those most affected by the COVID-19 pandemic are those without savings. If you have savings at the moment, don’t assume that the worst is over and start to fritter away your savings. Instead, work to gradually increase your savings and spend frugally. If you don’t have savings, gradually start to save right now — no matter how little — in anticipation for things getting worse.