Effective Strategies To Manage Your Wealth During The COVID-19 Pandemic
The COVID-19 pandemic has created severe economic downfall all over the world. Due to this reason, the majority of investors have suspended investing in many sectors. Apart from that many of the investment sectors are showing negative results, so it looks like a recession in the coming days is inevitable.
Financial experts around the world aren’t well aware of the fact that how much time it will take to emerge from this pandemic situation, and how much it will cost our financial future.
But considering today's impact on the economy, it can be clearly seen that people, specifically investors should implement their own strategies to manage wealth, secure capital protection, and also get desired returns.
Here we are going to discuss some tips about managing wealth during a pandemic which you might find helpful.
1. Prioritize to your financial goals as per the situation
What is the need for wealth creation in your life? The answer is simple! You want to have a financially secure life, all the comforts, an improved lifestyle, and want to fulfill your financial goals in time before retiring.
Due to the pandemic, most of the investment options are down and investors are getting deprived of the regular income streams. So, during such financial downtime, it is impossible to achieve all of your desired financial goals on time.
So, it is better to plan your financial goals again and decide which financial goals are still important to you and which aren’t. You should prioritize your financial goals to ensure that you can achieve the important goals first. Creating new financial goals will guide your wealth creation in a positive direction.
2. Target on building multiple sources to earn money
During this current situation, having multiple sources of income is the most crucial thing that you can imagine. Due to the economic downfall caused by the COVID-19 crisis, a majority of mid or low-income people have either lost their jobs or are about to face pay-cuts. It is too difficult to manage a job/creer in light of the Coronavirus pandemic. On the other hand, people with high-income and those who own businesses faced a huge decline in their income during the lockdown. It is still not clear when they can see a growth in their income even after the lockdown is lifted.
But, if you have multiple income streams, it would give you some financial flexibility and also help you to lower your dependency over your emergency fund or retirement accounts such as 401(k) or Roth ira. It would also keep you away from liquidating your essential investments if your main income source is in danger. Having multiple income sources can save you from falling into a new debt burden, and also help you to choose affordable solutions for debt.
So, apart from your regular business or the 9 to 5 job, you should focus on creating new income sources. During the lockdown, you may utilize more free time and use your hobbies to make money. Use your skills and provide online tuitions or work on freelance projects based on your expertise. Start affiliate marketing, or social media marketing business by using your personal computer, and make some good money without spending much. Doing such side hustles can be beneficial when you have limited income or going through a financial hardship.
3. Reorganize your budget to meet the essentials
Just think about the situation. Due to the pandemic, your income sources are getting limited and there is no sign of improvement in the economy for the time being. As a result, your purchasing power will be reduced and it may force you to pay a lot more money to buy the same thing that you bought at a cheaper rate, before the pandemic.
So, you should reorganize your budget in such a way that you may reduce low-priority or non-essential expenses, and focus only on the essential category to spend money on. Don’t forget to include contributions to emergency funds and investments towards retirement accounts. You need a solid emergency fund to meet unexpected financial obligations.
On the other hand, investing in a 401(k) or Roth IRA can help you to manage your financial expenses that come after retirement, such as taxes in retirement, medical expenses, urgent home repair, and renovation, etc. You should also make other investments to beat inflation in the long term.
4. Reconsider how much risk you can take
Due to the COVID-19 pandemic, many investors are facing financial hardship and their investment portfolios are also getting affected badly. The income streams from the investments are getting narrowed so creating wealth is now a difficult task to perform in this situation.
As a result, investors' ability to tolerate financial risks is also getting affected. Their actual ability to take investment risk is getting reduced as they do not have a solid fund to cover up losses.
For example, if you, being an investor, can take up to 30% loss over your investments previously, now you are hesitating to bear the even a minimum 10% loss. Clearly, you may not be in a position to take that much loss due to the shortage of funds.
So, it's the best time to reconsider the risk tolerance and avoid making investments in those sectors which might incur a high loss. Do not overestimate your financial capability to take high risks, the situation isn’t like the same before.
An accurate reassessment of your risk tolerance will help you start wealth creation all over again. But you should also protect your money at the same time.
5. Refurbish your investment portfolio
The investment options are not as exciting or prompt, just like it used to be before the COVID - 19 outbreak had erupted. So, before investing in multiple sectors and asset classes, you must consider your age, financial goals, risk tolerance, and expected returns.
Due to the economic slowdown and the fall in the investment markets, your investment portfolio might also face an imbalance; many of the investment returns have been narrowed or stopped.
So, you should now rebalance or refurbish your damaged investment portfolio so that you may increase or decrease the proportion of investment items in the asset classes.
Do this to make the sync between your investment profile and with your current financial goals, risk tolerance, and expected returns on various asset classes. You may also discuss the matter with a professional investment advisor if you want expert advice on this. For example, if you want to invest in the real estate sector to grow your wealth, then you should discuss the matter with a professional realtor and get suggestions or tips on real estate investing.
6. Invest in gold for future
Gold investment is the safest and best investment in the world. Being a wise investor you may invest in buying Sovereign Gold Bonds which may generate an interest income of 2.5% per annum.
In the last 30 days, gold prices have dropped by 3.16%. It is solely because of the COVID - crisis. Remember, in the future when the vaccine of COVID - 19 will be released, the economy will rise again, as well as the gold prices. So, if you have enough funds to invest in this item, go for it.
This is a guest post by Patricia Sanders
Patricia Sanders is a professional content developer and a regular contributor to debtconsolidationcare. She specializes in the financial niche and is well known for her unique financial tips that can be very effective. She always tries to help people, suffering from financial hardships, through her writing. To get in touch with her (or if you have any questions regarding this article) email at sanderspatricia29@gmail.com.