How to Pandemic Proof Your Finances

A pandemic like COVID-19 comes hard and it comes fast. They are also more likely to occur in the future with increasing travel, urbanization, and climate change fuelling the increase. We’re an increasingly mobile population; for example, in 1970 there were 310 million flights. In 2018, there were 4.2 billion flights. This mobility helped spread the coronavirus from China to more than 60 countries in two months! Furthermore, we are living closer together and more and more of the world’s population is living in urban areas. According to the UN, by 2050, 68% of the world’s population is expected to live in cities. Climate change is also increasing the likelihood of infectious diseases with 1 billion people expected to be exposed to mosquito-borne diseases by 2080. 

Knowing that pandemics are going to become more and more common, how can you pandemic proof your finances? Here’s how!

1. Have an Emergency Fund

This is often easier said than done, especially if nothing was saved pre-pandemic. You have probably heard about the need for having one and it’s more true than ever. In addition to having a personal emergency fund, if you own any rental properties you should have a separate emergency fund for each one equal to a minimum of one month of rent. I would suggest increasing this to two to three months per property to be more pandemic proof in case a tenant is unable to pay their rent on time.

You should also look to increase your springy debt. This means having easy access to low-cost debt that is easily paid back, such as a line of credit. For example, when COVID-19 hit, I called up my bank and increased my line of credit by 3x. I don’t plan on using it but it’s there if I need it.

What if you’re in the middle of a pandemic or recession? Here are other ways that can help.

2. Diversify Your Income

A pandemic like COVID-19 can disrupt your primary income either through pay cuts, reduced hours, or job loss. This is why you should have multiple sources of income. You likely have heard about diversifying your stock portfolio and so the same concept applies towards diversifying your income.

Side hustles are a popular topic and they can be a great way to diversify. However, the chances of them being impacted by a pandemic, depending on what they are, are high, so choose a side hustle that is both personally rewarding while having the ability to work on it from the safety from your own home. Online side hustles, like a drop shipping business, are great. Same with food delivery services like working for Instacart, or writing a book or recording an audiobook. You can even make money using apps on your phone without leaving your home. Consider even making your own homemade soaps or masks and selling them around the neighbourhood. Everyone likes to support local!

Another idea is to help find long term tenants for Airbnb property owners and charge a fee. A lot of Airbnb owners are looking for long term tenants during a pandemic with fewer and fewer people travelling due to social distancing. Why not help find a long term tenant and collect a commission? All you would need to do is contact Airbnb owners asking if they would like a long term tenant and then put up some ads. 

Rent out your book collection! Everyone still wants to read especially when libraries are closed. Be sure to wipe them down before you lend them out and again when you get them returned. While this may not bring in a lot of money by charging up to $5 a book, every dollar counts.

Create homemade weights and sell them. With gyms being closed a lot of people are looking for workout equipment without costing an arm and a leg. There are many ways to do this online. Start by finding the right niche and order the materials and then market it online. The demand is immense. I would know because I’ve been trying to find workout equipment online for weeks!

The point is the possibilities are endless. You just need to know where to look.

3. Go Digital

During a pandemic, if you’re not digital you’re dead. Ensure all your bills are payable online and that you are receiving online banking statements. If you are paying rent, see if you can use an online payment platform to avoid using cheques.

4. Adapt

For example, for real estate, if you are renting out your property on a short-term rental platform like Airbnb or VRBO, it would be prudent to switch to getting a longer-term tenant to rent during the pandemic. Or if you are implementing the BRRR (Buy – Rehab – Rent – Refinance – Repeat) strategy with real estate, it may be wise to stop at the renting stage and wait it out if you can by finding or keeping a renter. Notably this gets harder the longer you wait once a pandemic hits.

If you’re a teacher, consider creating an online course for parents. There are a lot of online platforms like Udemy and Thinkific that make this easy. You can also look to do online tutoring and charge a fee for that or offer to online tutor your friend’s children. This will give their parents a well-needed break and they will be grateful for it.

5. Stress Test Your Budget

This means taking a look at your budget and calculating what would happen if your income dropped 10%, 50%, or even 100%. Could your personal finances withstand a drop like that? If not, rebalance it so that you’re not stretching yourself by paying down your debt and increasing your savings before a pandemic. You want to be thinking what is the worst-case scenario, whether a pay cut or job loss and capping your potential downside. For example, if you have real estate holdings and a lot of debt, you could sell a property with high equity value before a pandemic hits to increase your emergency fund and decrease your debt exposure. Ideally, you want your savings rate to be so high, that if a pandemic hits, you can live off your savings until things turn around. If this is not possible, then look to sell off unneeded items around the house to bring in needed cash.

Legal Disclaimer: The views expressed by Mr. Dumont on Money Sensei are solely his and not intended as investment advice nor a guarantee of any financial return. Mr. Dumont is not an investment or tax professional, so the information contained on the blog is not a substitute for professional advice. The contents of this blog are accurate to the best of his knowledge at the time of posting, but rules and laws are ever-changing. Please do your research to confirm that you have the current information.

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