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The coronavirus pandemic isn’t just a big public health issue. It’s also the biggest thing to hit the world’s economy since the financial crash in 2008.
The virus, and countries’ attempts to contain and delay it, have big knock-on impacts that are likely to affect everyone's personal finances sooner or later. But there are steps you can take to increase your resilience.
Your emergency fund recommendation is always right near the top of your personal financial plan, and there’s a very good reason for that. However rainy the day gets, it’s good to have a cash cushion to fall back on.
You should aim to have enough saved up to tide you over for three to six months if you didn’t have any other income.
If you’ve not yet started building your emergency fund, your first step is to get cracking as soon as you can. Your emergency fund should always live in easy-access accounts; follow your plan to see which accounts we recommend for you.
You’re entitled to sick pay if you’re off work, but the statutory payment is just £94.25 a week so it doesn’t go very far. There are some workers who aren’t covered by statutory sick pay at all.
One option is Accident, Sickness and Unemployment (ASU) insurance, which is a type of income protection designed for short term illness, like coronavirus. ASU kicks in if you can’t work, and pays you a proportion of your income for up to 12 months.
Alternatively you can adopt a longer term plan, using your emergency fund to get you through the short term with an income protection policy in place to cover you for any longer term needs.
Check your plan to find out how our longer term approach would look for you.
This is about to get heavy for a moment. Although the mortality rate of COVID-19 is low, this isn’t a bad time to pause and reflect on what you’d leave behind if the worst was to happen.
Anyone with a mortgage, or who has a partner or children, will see a life insurance recommendation in their plan. This is designed to make sure no one has to struggle with payments that you’re not around to make.
Everyone also has a recommendation to make a will and a Lasting Power of Attorney. It’s never a bad idea just to get these sorted.
For those who have money invested in stocks and shares: the best thing you can do is take a deep breath and stay focused on your long term goals.
As long as you have enough money in cash to cover your short term essentials, there’s no need to panic. You should be able to hold for the long term and wait for the markets to recover.
A properly diversified portfolio, which is appropriate for your risk level, should also help to protect the value of your investments in a downturn.
Take a look at this chart showing the last few weeks.
The green line is one of the funds recommended by Multiply, containing a mix of equities and government and corporate bonds from different countries. The red line is a typical fund invested only in UK shares.
Source: Trustnet.com
If you see an investment recommendation in your plan, it will always advise you to invest an affordable amount into funds which suit your needs.
Everything’s happening very fast. But there are steps you can take if you’re feeling unprepared.
First, review your budget to see if you can cut back on spending. If you have income at the moment, save as much as you can.
The government has already announced some financial assistance for people affected by the epidemic. Keep yourself informed of your rights as the situation develops.
If you are already affected, make sure you claim for any state benefits you might be due, such as sick pay.
If you have a mortgage and you’re worried about making payments, you can speak to your bank about the possibility of a mortgage holiday.
If you’re renting, speak to your landlord as the government has also announced that it will legislate to make sure people are protected from eviction.
From all of us at Multiply (currently going slightly stir-crazy working from home) we hope you're keeping well.
We hope you find your plan useful to help you build resilience in these challenging times. You can give us a shout at support@multiply.ai if you have any questions.
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