How to manage and surprisingly thrive in the pandemic
In times like these, I like to refer to history for guidance. The most recent turbulent time we can refer to is the 2009 market crash brought about by the Global Financial Crisis (GFC). The US went into a recession and Australia managed to avoid it only with a significant Government stimulus package.
Strangely, however, the hard times were short-lived, and things returned to normal reasonably quickly. There is still a large portion of the workforce that hasn’t experienced a prolonged downturn or recession in Australia.
Now we have a pandemic that threatens to be seismic to all markets, stocks (already), property and employment…
So what can you do to manage, and dare I say it, thrive in this pandemic?
The basics: 3 tips to manage your money
While I appreciate that everybody’s circumstances are going to be different, here are three tips that I suggest you use to manage your money and your mental health in these uncertain times.
1. Minimise to maximise
As the employment market becomes more and more uncertain, and more jobs are put on hold, it is crucial to minimise waste.
Every dollar counts, and that doesn’t just apply for these times. A careful review of your costs is a great way to uncover where some of your cash has been sneakily disappearing.
The obvious first place to look at are those subscriptions, like pay television or magazines (does anybody still read magazines???). Maybe in the past, you have had a few options, and now might be the time to cut it back to just one, or none if you can manage.
Being in isolation also means a propensity to eat more often. Food wastage is a massive silent money drain. Look into how you can recycle leftovers for another meal and reduce the cost of wasted food.
If there are other areas of your life where there is waste, look at how you can make cutbacks… turn the lights off, reduce the time the pool cleaner runs, anything that can help reduce costs and maximise your cashflow is a good thing.
Minimise to maximise how long your money can last.
2. Know your numbers
I often hear from my members that they don’t have time to concentrate on the numbers.
Now I hate budgets more than most people, instead, I prefer a money plan.
Use your time in isolation to understand your numbers, create a plan for your money, so you know what is at stake.
Understanding your numbers and how that will impact your coming weeks and months will make it a lot easier if you need to speak to your bank for assistance. An informed discussion is always more productive than the alternative.
3. Invest in you
One of the most likely benefits of this extremely difficult event is that more people will realise the need to reduce the dependence on a job. There is a reason the saying Just Over Broke came into existence!
With some extra time for yourself away from your job, why not investigate gaining some new knowledge that can lead to a new income stream.
This could be to create a side hustle for when things return to normal, or it could be to learn how you can invest your money to create a secure financial future.
Investing in you is more important than ever, and Robert Kiyosaki of Rich Dad Poor Dad fame has been preaching this for decades. Now is the time to ACT.
Prepare to thrive
I get it, suggesting you can thrive right now is a little hard to believe.
However, let me tell you that the wealthy are doing exactly that, they are preparing to make some of the biggest returns they have ever made.
I have been repeating this quote ad nauseam lately from Warren Buffet: “Be fearful when everybody else is being greedy, be greedy when everyone else is being fearful”.
It is fair to say there is a reasonable amount of fear in the markets now, right?
What can you do to prepare to thrive and create great financial results in the coming months and years?
First is to understand what people need most in difficult times, and second, what asset types do best when economies are struggling, like a recession.
Looking at what people need most, there are two standouts, food and shelter.
No matter what is happening in the world, we all need food and somewhere to live.
When it comes to stocks that might do well in these times, food-related companies and industries are likely to outperform. Just look at the recent run on toilet paper, or flour, or sanitary products for an example.
When it comes to shelter, everyone needs somewhere to live. While there is a lot of discussion about the direction of property prices in the next few months, the key is to focus on the long-term.
With interest rates so low, and likely to stay that way for some time, subject to any dramatic change to inflation (which is possible, but I believe unlikely at this stage), property is going to be an attractive option for both owners and investors.
There is likely going to be some great deals available during and post the pandemic that will propel your wealth over time.
The final option to thrive is to look at what markets do for safety in times of fear. The normal flight to safety is to assets like Gold and Silver.
While the Gold market has been highly volatile in the past month or so, the fact is that Gold has been in a slumber for many years and is likely to be a safety play for many large investors. With so much uncertainty in other asset classes, gold and silver could be the investment that you look back on one day and say, gee I’m glad I got in back when I did.
As someone who teaches to have a consistent investment plan, I also believe that the stock market will be a good long-term investment at current levels. That isn’t to say we won’t see further falls, most likely we will. However, over the long-term, I doubt anybody will be disappointed to have invested in a market at current prices. The key of course is to choose quality stocks that preferably are in the industries or related industries to those mentioned above.
Investing in the stock market on a consistent basis enables you to smooth out your entry levels and benefit from being in the market over time, rather than trying to time the market.
The most important next step
Armed with this information, the challenge is now to do something with it.
The difference between the successful and the rest is the successful people ACT, they take ACTION.
While it is totally reasonable to feel overwhelmed by the current pandemic, the alternative is to see if for what it could be: the greatest wealth-creating opportunity of your lifetime.
Now there is no need to rush, it is totally reasonable to get through this isolation period and a return to normal, however don’t put off what you can do now to be ready to invest when life is back to normal.
Andrew Woodward is a mindshift.money accredited money coach based in Sydney who teaches people smarter money management and how to invest for their future, simply and efficiently. Sign up for his free weekly money tips and access a free report at theinvestorsway.com.au.