Financial Planner Shares Tips to Crisis-Proof your Finances

As the enhanced community quarantine is scheduled to end on April 30th in Luzon, it is expected that there will be a limited return to normal activities. It means some people will be going back to work and public transportation will also be allowed—also in a limited manner. That said, we can’t say that life will go back to the way things used to be.

One of the pressing concerns for all of us will be the economy. Since economic activities are not back to normal, it’s expected that the global and national economies will go through a slowdown, if not a recession. This will naturally affect everyone: from businessmen to workers and consumers. The question in the minds of many is, how do we cope while we’re in this situation?

According to Fitz Villafuerte, a registered financial planner, the first thing we all need to do is have the proper mindset: this will help us see the situation clearly, accept reality, and respond in the right way.

“The best mindset in dealing with these uncertain times is that of a Stoic,” Villafuerte said. The Stoics are ancient Greek philosophers who taught people the proper way to think and live life.

“One of the basic tenets of Stoicism is drawing a line between the things we can control and the things we cannot control. We don’t have much control over the global and local economy. There are so many factors at play that affect it,” he said.

Since the global economy and national economy are beyond our control as consumers and workers, Villafuerte said it’s better to focus on the things we do have control over.

“We have a lot of control over our personal economy – our cash flow is most affected by our own decisions, actions, and habits. It’s important to be aware of what’s happening but at the end of the day, we should remain focused on our personal finance because that’s where we have control,” Villafuerte explained.

Villafuerte mentioned five tips that we should put in mind as we put our personal finances in order during the pandemic:

List down your expenses. Live simply and spend wisely. Study how you are spending your money during these financially constrained times. Adjust your spending by living a simpler lifestyle and be strict on spending mostly on your needs.

Spending on your needs is the priority, of course. However, that doesn’t mean you should give up on some of the wants that make you happy. Just be sure that when you buy certain wants, these are still within your set budget and will not compromise your needs.

“As long as you are able to save, then just continue your habit. But if you’re up for a challenge, then see how you can increase your monthly savings rate when things start to go back to normal. If you’re not a saver before, then it’s a good time to learn practical saving strategies such as the concept of paying yourself first, and applying it as soon as you can,” he said.

Explore and learn mobile and online banking, digital banking, and digital wallets. With public transportation either non-existent or few in number, and business operations still limited, it’s better to switch to online and digital transactions. Not only is this more convenient, it also achieves physical distancing to lessen exposure to the coronavirus.

Clean your house. Use up the time at home to organize your house. Group your household items into four categories: Keep, Sell, Donate, and Throw. Doing this helps practice your mind to be more organized, free of clutter, and able to prioritize what’s most important. Do this same checking and organizing with your financial and legal documents.

Define, revisit, and reassess your financial goals. The COVID-19 pandemic is going to change our world in the short, medium, and long-term. This means that our financial goals will also have to be adjusted. It’s a good time to re-think them now and plan accordingly.

Explore, learn, and make money online as a freelancer. While there isn’t any vaccine or cure for COVID-19, many of us will either work from home or need to find freelance work that can be done online. This provides us an opportunity to learn new skills as a freelancer, so we can make money online.

Besides these five tips, Villafuerte also has some advice regarding investments. As the world economy struggles to recover from the financial shocks caused by the pandemic, Villafuerte says the best rule of thumb when choosing an investment is to look at your own financial goals.

“Usually, we have short-term, medium-term, and long-term financial goals. You have to choose different types of investments based on the time you allot for attaining those goals. For example, if you have a long-term financial goal that you want to achieve in 10 years, then you can invest in the stock market or equity funds.

“Since your time frame is long term, there’s enough time to ride through the ups and downs, the volatilities in the market, like what’s happening now with the pandemic. This allows your investment to make money many years in the future,” he said.

However, for short-term goals, Villafuerte recommends investing in low-risk investments like time deposits or money-market funds. For medium-term goals, then medium-risk investments like bonds and balanced funds would be the better choice.

“Moreover, it’s important to understand that investing is not a one-time thing. It’s not something you do only when you feel like it or when someone says it’s a good time to invest. It should be a habit that you do regularly, month after month if possible, and continuously for many years.

“Always invest according to your financial goals. Before investing, you need to ask first, when are you planning to use the money? What will it be used for? Once you know this, it will be easier to choose which investment to go into,” he said.

Finally, Villafuerte says times like a pandemic are a good time to buy insurance. “It’s one of the best tools for financial protection. As we cope with a lot of uncertainty, it’s good to have insurance that will protect the family in case something happens to the breadwinners. Insurance is a necessity for breadwinners,” he said.

BDO, the largest bank network in the country, offers insurance that suits your needs, whether you’re a young adult planning ahead, a parent with a family that depends on you, or simply wanting to protect what you have.

BDO is operating select branches during the enhanced community quarantine. This is in keeping with its commitment to address customers’ financial needs and to help keep the economy running. For inquiries on which branches are open and for online services go to bdo.com.ph.