COVID-19: How Does it Affect Personal Finance
Updated: Jan 7
When the coronavirus pandemic began, many were not prepared for the effect it would have on their personal finances. As more people stayed home, the demand for certain products and services went down. Businesses started losing revenue and were forced to close down or downsize. As a result, a significant chunk of the population saw a reduction in their paychecks while others lost their jobs.
The loss of jobs saw 32 Million Americans file for unemployment in July 2020. According to the National Endowment for Financial Education, 84% of Americans admitted to feeling stressed about their finances. Additionally, many households around the world also reported a 30% to 80% decrease in income.
Clearly, the Covid-19 pandemic has shown the importance of personal finance planning. It has also highlighted the need for generating smart passive income. In this article, we take a look at how to manage money during and after the pandemic.
How Covid-19 has affected personal finances
The Covid-19 pandemic has spread to nearly every country in the world. As the crisis continues, low-income households may see their wages and savings continue to dwindle. Below we take a look at the ways your personal finances could be affected and how to improve them.
1. Decreased savings
Over the last few months, you may have found yourself digging deeper into your financial reserves. This may have depleted your emergency funds and savings accounts over time and reduced your spending capacity. Luckily, you can learn how to make passive income.
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2. Inability to pay bills
You may be having trouble meeting your financial obligations since the Covid-19 pandemic began. But you are not alone. As of September this year, 8.3 million Americans admitted to being late on rent payments. One of the solutions by Honeygain is to try out some passive income ideas.
3. Loss of retirement fund
Even more alarming is the effect the pandemic has had on the retirement fund. Those who have lost their jobs no longer have access to retirement plans such as 401(k)s. Without any extra income, you too may be unable to meet your monthly contributions.
Avoid dipping further into their retirement savings to stay afloat. Learn how to earn extra money from home.
4. Lower investments
Many people have learned how to make passive income through investments. However, the Covid-19 pandemic has forced investors to pull out their investments or make changes to keep their finances stable. Many have sold their stock to cover expenses.
However, those with money to spare have done the exact opposite. 53% of investors took on lower-risk investments while 35% took on higher risk ventures. The results of such daring investments remain to be seen.
Even as most countries open their economies, the effects of the pandemic have already taken root.
How to improve personal finance planning
As with every significant occurrence, there are lessons to be learned. Covid-19 has brought to light the financial vulnerability that many of us suffer: inadequate personal finance planning.
In fact, learning how to manage money and how to earn extra money from home can be beneficial.
Let’s look at the steps that you can take to ensure stability in the future.
Create a priority-based spending plan.
Review your health insurance and ensure it is up to date.
Consider meeting with your debtors to renegotiate loan terms.
Lower consumption and increase saving efforts.
Make investments and take advantage of the fluctuating stock market.
Avoid more debt.
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The ravages of the pandemic have been felt worldwide. But there is a silver lining. People are devising new ways of coping with the pandemic. Hopefully, you can too.
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