The increase in inequalities and the queues of hunger that fill again are only two faces, perhaps the most visible, of the consequences of the Covid-19 pandemic. In the current phase, in which the economy tries to overcome the outbreaks of coronavirus and the public powers and the private sector have mobilized to cushion the impact of the crisis, the finances of many households are threatened or already depleted by the lack of income. At this juncture, experts try to provide some advice to make ends meet in the best possible conditions.
1. Use the mattress
“Those who were able to save during the months prior to the pandemic will now have a cushion to address possible drops in recurring revenue”, Says José María López, finance expert. It is very possible that for some people the time has come to open that piggy bank that, in times of bonanza, it is advisable to reserve for the most complicated situations. As an alternative option, the most fortunate “could make use of the returns obtained from their investments, so that the capital saved or invested does not decrease,” adds López.
2. If there is investment, do not undo it
In the case of owning an investment product, getting rid of it at this time is not a good idea, according to Lopez. “Whenever personal circumstances allow it, it is better not to divest, in a general context of market declines”, Suggests this expert. “After the first blow of the economic crisis, it has been possible to appreciate a certain recovery in the price of equities or in the value of the shares of investment funds,” he adds. On the contrary, selling in a moment of panic – as at the beginning of a crisis – can deepen the economic losses.
3. Monitor the debt
If in the pre-pandemic era it was possible to reduce debt, perhaps now this easing will allow access to new financing to temporarily meet the most urgent obligations. “Yes, we will have to monitor the total volume of debt and financial burden (that is, the commissions and interest that are paid for it), so that the relief provided by the new financing does not become a heavy slab later, in the recovery phase, ”warns López.
Since the crisis has hit all social and economic agents to a greater or lesser extent, creditors should more easily understand the possible difficulties in meeting obligations such as paying rent or essential supplies. For this reason, negotiating with them “will be justified”, in the words of López, for whom two approaches (or a combination of both) are possible: “postpone the fulfillment of the obligations or maintain it, but reduce the amount”. For greater security of the parties, this expert advises to leave a written record of the agreements reached.
5. Go to the bank
The Government approved measures to soften the impact of the crisis. Among them is the moratorium on mortgages and other loans and the opening of a line of credit for SMEs and autonomous endorsed by the ICO. According to López, “therefore, in case of having problems, the first option would be to expose the situation to a financial institution, to try to reach a provisional solution.”
6. Know the family budget
Saving when income is reduced can seem paradoxical and very complicated. To undertake this task, however, it is essential “knowledge of personal finance and have a family budget in which both the different types of income (recurring from work, other regular income such as rents) or extraordinary income are taken into account and, especially in this case, the expenses ”, indicates another financial expert, Antonio Gallant.
7. Discerning expenses
On the one hand, there are the mandatory fixed expenses, that is, those that do not usually vary or do so only from time to time, such as the mortgage, the expenses of the owners’ association or the fees of the schools, among many others. “This item of spending is very difficult to reduce,” admits Gallardo. However, on the other hand, they are lMandatory variable expenses such as basic supplies electricity, water and telephone, food or clothing. “These, normally, cannot be eliminated, but it is possible to reduce their weight in the budget,” adds Gallardo. For example, changing eating habits, substituting branded products for cheaper white-label ones, postponing some clothing purchase decisions or accessing second-hand markets, among other options.
8. Split payments
“Even so, although we have to adjust, the savings that are achieved are not very important,” warns Gallardo. Within these categories of expenses, there are also others that are not monthly, but should be considered as such: for example, local taxes (IBI, circulation) or insurance. Reducing them is more complicated, so Gallardo suggests taking into account other modalities to pay for them, such as split your payment.
9. Cut leisure and free time
The item in which the main adjustment effort will be made, however, is that of non-mandatory or discretionary expenses, such as leisure and free time. “We often do not know how much we spend on this game,” Gallardo emphasizes, “but it is necessary both to plan the amount of money we want to allocate to it, and to control what we actually end up consuming.
10. Postpone the purchase
Within this chapter, financing decisions can play an important role in saving. “For example, the financed purchase of a car or a work in the home could be postponed,” explains Gallardo. This expert also emphasizes the importance of risk involved in financing. It is true, this can help us to get out of an economic trouble these months, but, “if we cannot restore our income in a short period of time, we would end up having one more problem in the event that we fail to pay and extinguish the debt”.