Seven steps you must take to protect your money amid the coronavirus crisis

This plan could help your finances survive the economic implications of the outbreak

Illustration by Mathew Kurian 
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We all have a lot to worry about at the moment. Our health, our families, our friends, our jobs and our countries have all been thrown into jeopardy by the Covid-19 pandemic, and nobody knows how or when it will end.

Amid all these concerns, people must take good care of their personal finances.  Stock markets are crashing, workplaces are closing, shopping malls are emptying and jobs could be lost. Uncertainty is rife, and it's at times like these that people discover just how financially secure they really are.

This seven-step plan could help you survive whatever the next few weeks or months throw at us, and beyond.

Step one: bolster your cash safety net

Cash is no longer king after a decade of near-zero interest rates, but you shouldn't shun it either.

Don't try timing the market, the chances are you will get it wrong ... markets have always recovered in the past, given time.

Demos Kyprianou, a board member of SimplyFI, a non-profit community of personal finance and investing enthusiasts in Dubai, says at times like these, cash comes into its own. "I would recommend having enough money to cover six months of basic living expenses, to protect you against emergencies such as losing your job or falling ill, or possibly both,” he advises.

Your rainy day funds should be held on instant access, so you can get them in a hurry. You will earn next to no interest these days, which means its value will fall in real terms, but at least it's there for you. If you already have an emergency pot of cash, well done. If you don't, start building one now.

Step two: look for investment opportunities

There is another advantage to holding cash right now, says Stuart Ritchie, director of wealth advice at Dubai financial advisory firm AES International. It means you can take advantage of recent stock market falls, and invest money at bargain prices.

“For those who are able, now is a fantastic opportunity to invest more, as global stock markets fall by around 30 per cent. Incredibly, the FTSE 100 is now actually more than 20 per cent cheaper than it was way back on 31 December 1999," Mr Ritchie says.

He quotes US billionaire investor Warren Buffett's famous maxim that investors should "be greedy when others are fearful, and fearful when they are greedy".

If you are feeling brave, now could be time a good time to get greedy, and buy shares at discounted prices.

Be warned, they could have further to fall. This means you should only invest money you do not expect to need for at least five years, and ideally much longer.

Mohamed El-Erian, chief economic adviser at Allianz, said last week it is too soon for investors to start buying again.

“Do not buy this dip, respect the technicals,” he said. “This will sort itself out, but will not sort itself out before some further damage unfortunately. You should also not panic.”

The best approach may be to drip feed money in, taking advantages of any dips, rather than throwing in a single large sum, which leaves you vulnerable to the next sell-off.

Step three: get on top of your debt

As central bankers slash interest rates, led by the US Federal Reserve, variable-rate mortgages will get cheaper. Many homeowners could reap the benefit, unless they have locked into a fixed rate.

The Central Bank of the UAE slashed interest rates on its certificate of deposits by 50 basis points, earlier this month, following the Fed's decision to cut its key rate by 50bps.

However, this will make little or no difference to the interest rates you pay on credit cards or overdrafts, which can be as high as 30 or 40 per cent, and aren't affected by base rate cuts.

Ambareen Musa, founder of UAE comparison site, says history shows that during a recession or financial crisis, the people who fare worst are those who have excessive debt. “If you lose your job, this will make it harder to keep up with repayments on your mortgage, credit cards and any other debts.”

On Saturday, however, the regulator rolled out a Dh100 billion stimulus package and ordered lenders in the UAE to use the funding "to grant temporary relief" to retail customers for a period of up to six months to mitigate the risk to their finances if they lose their jobs or have their salaries cut.

Ms Musa advises those with debts to start by paying off liabilities that charge the highest interest first, such as your credit card.

Once you have cleared that, move onto the next most expensive, and then the next, while remembering to make minimum monthly payments on any other types of credit you have.

Ms Musa says that by paying your debt down, your monthly obligations will also fall. “This will allow you to put a bigger chunk of your income towards savings that will help tide you over tough times," she adds.

Step four: stop frittering money away

Since the jobs and stock markets improved after the financial crisis of 2008-09, many of us have become a little careless with money. It is all too easy to fritter money away on eating out, clothes and holidays, but, for now, those days are over.

As more people self isolate, this is a good time to cut back on your spending, and find new priorities. When all this is over, you might discover you don't need to go out as much, or always have the smartest outfit at the party.

By spending less now, you will help to build up a reserve of cash. In turn, you might discover you can have fun without throwing money around, as the pandemic forces people to focus on what really matters: the family and people you love.

Try tracking all of your expenses for a month, to see where your money is really going, then look for ways to cut back. "Allow yourself a few luxuries, but the weekly splurge on non-essentials has to go, as you look to build up your emergency savings,” Ms Musa says.

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Step five: balance your portfolio

The stock market crash has wiped an estimated $17 trillion (Dh62.4tn) off share prices, and hammered almost everyone's retirement portfolios.

So how do you respond? By staying calm. Avoid selling up today, otherwise you will only turn your paper losses into real losses, and lock yourself out of any market recovery.

Stocks could fall further, but when the coronavirus threat finally recedes, they could rise rapidly, and you do not want to miss out on that.

Mr Ritchie says it is hard for investors to control emotions in these circumstances.

“However, looking back at similar cases, markets have always recovered," he says. "So one year after swine flu struck in 2009, the US S&P 500 index was up an impressive 35.96 per cent. A year after the avian flu outbreak in 2006, the index was up 18.36 per cent. Similarly, markets rose 17.96 per cent in the year after the Middle Eastern respiratory syndrome (Mers) outbreak in 2013.”

The Covid-19 outbreak looks to be a lot more serious but with luck, the same pattern should still apply.

Mr Ritchie says it helps to have a balanced portfolio, that includes a global spread of shares, as well as assets that perform differently in times like these, such as cash, bonds, property and safe haven gold. “This will minimise your losses, compared to holding only equities, reducing the need to panic,” he adds.

Mr Kyprianou says stay invested and resist the temptation to second-guess where share prices are heading next. “Don’t try timing the market, the chances are you will get it wrong.”

Most important of all, don't panic. “Avoid the herd mentality, as fear will work against you. Markets have always recovered in the past, given time,” Mr Kyprianou adds.

Step six: assess your vulnerabilities

Nobody knows what will happen next with the coronavirus. If you keep your job, everything should be OK, but what if you don’t?

Mr Kyprianou says improving your job skills and technical knowledge is even more important now, and you should work on them using online learning platforms.

“You can set up career goals, and create your personal development plan to ensure you create a cycle of continuous improvement," he says.

This can reduce the risk of being made redundant, because your improved skills add more value to your existing employer, but it also means that if your company struggles you are likely to find something better, faster.

"There are no guarantees, but it is all about increasing probability," Mr Kyprianou adds.

Step seven: get your CV ready

“Building good working relationships with colleagues and having a reputation that you can get things done, will make recruiters far more likely to put you forward for a job," says Mr Kyprianou, who says networking is perhaps the most valuable job skill of all. This can be done remotely for now through LinkedIn.

Also, brush off your old CV and give it an overhaul. “That way if you get a call from a recruiter, you can email it without delay, instead of wasting time updating it. It should also come across better than one that has been rushed," he adds.

With luck, your current job will survive the Covid-19 outbreak, but it is best to be prepared, just in case.