The swift and massive shock brought about by the health crisis and shutdown measures to contain it has severely affected the economy of the world. The stock market is plunging, demand is crashing, and people are starting to tighten their belts. It is hard, if not impossible to keep mentally healthy with the worrying headlines about how long the pandemic will last. For the sake of our sanity, we need to take a break from the bombardment of the news and focus our attention on becoming more financially resilient. It is not a good idea to continue high spending.
Needless to say, not all people are equipped to handle this crisis, which continues to deepen. They have a hard time understanding how to manage money or invest, they do not plan for retirement, and, worst of all, they do not build savings. The lack of financial resilience is putting numerous people at risk. Regardless of income, many have experienced financial difficulty after the coronavirus shock, which has placed an immense burden that is likely to increase in the future. The support that many are relying on has not been effective in keeping people out of difficulty.
The relationship between clients and banks resembles a social contract in the sense that it involves mutual protection and welfare. This social contract has been reinforced. More exactly, consumers have a high degree of trust in financial institutions. They expect banks to do the right thing during the pandemic – in other words, to alleviate financial pressure. It is important to draw attention to the fact that financial institutions have a moral obligation towards people to build products and services that foster people’s financial resilience.
The result is that clients enjoy support and have the necessary tools to save money, reduce debt, better manage their money. They can take advantage of secured and unsecured loans, not to mention other savings products offered by banks. Financial institutions recognize that people have a tendency to move in and out of debt and, consequently, they are struggling to come up with ways to help people who are struggling with problematic debt in the long term and those wishing to build resilience so that they do not end up with debt. The response of banks will be more effective if they carefully consider the financial products that can contribute to resilience and under what circumstances.
The COVID-19 crisis has prompted some people to ask for advice regarding planning for the financial future. Interestingly, consumers are not preoccupied with themselves. They wish to make sure that the rest of the family is doing okay. Consumers are not satisfied with the information they find in books, printed media, or on websites, so they reach out to financial planners due to their expertise in financial instruments. The point is that many clients are coming to banks for guidance, taking this non-negligible chance to see where their money is going and how they can make a positive change.
Investing in financial health offers the best returns. Life during an economic downturn can turn out to be difficult, to say the least. Financial resilience is a must to survive COVID-19 and it does not demand massive efforts. Transformation is absolutely required, so it is necessary to be proactive. The coronavirus pandemic has created an unprecedented shock, yet it has also presented the opportunity to learn new lessons and build for the future. In what follows, we will present some survival tips for building financial resilience.
Operating finances with a budget helps control spending, attain financial goals, and find financial contentment. Make a list of your monthly expenses (rent, loan payments, etc.) and compare them with your household’s income. If the income exceeds expenditure, that is, you have a surplus, you might want to put some of that money aside. On the contrary, if the expenses are consistently higher than the income, it is paramount to adjust spending habits. Look for places you can cut to make ends meet; otherwise, you will be eating your savings away.
People have been spending differently during the coronavirus pandemic. To be more precise, some have increased their spending on general merchandise, groceries, food delivery, and travel. Being isolated and bored can encourage unnecessary spending. It is important to resist the temptation of purchasing unnecessary items or services. In this respect, it is helpful to take into account the material and emotional values when deciding whether or not an expense belongs to your budget. If you have automatic bill payments active, it is recommended to put them on pause until you are in a better financial situation.
If you are in the impossibility of making payments either because you have lost your employment or business operations have been temporarily suspended, it is essential to reach out to lenders (mortgage, car, student loans, etc.) and discuss your situation. You may be able to defer monthly installments of a credit product, so complete the application and wait for a response. If it is not possible to take a break from repayments, it might be possible to reschedule them over a longer period of time. Numerous lenders have made exceptions and arranged special accommodations to support clients during these tough times.
The bottom line is that there will always be situations with the potential to cause disruption to our finances. Nobody should have to worry about money. Financial resilience represents the ability to bounce back when there is a threat to your personal finances. The most vulnerable need to take proactive measures before it is not too late. As far as policy makers and funders are concerned, they should make more and more investments in the financial tools that build individual and household resilience. More exactly, people should be in a position to recover from the crisis that we are currently undergoing.