The Survivor’s Guide to the COVID-19 recession

Yesterday we talked about what businesses can do to prepare for the oncoming recession. Today we’ll talk about a far more relevant topic to everyone. What can the individual person do to weather the oncoming recession? To start with, I would like to put a huge disclaimer up – the advice contained in this article is given at a very general level, you will still need to consider your location, financial situation and personal preferences when making use of any of the advice contained in this guide. Unfortunately, there is no one size fits all advice when it comes to individuals, but there are some best practices which all of us can incorporate into our daily routines.

Ok, so now that I have gotten that out of the way, let’s get stuck into it!

No.1: Identify your personal income stream(s)

Think of yourself as a business owner. If you are already a business owner – this might be easier to do. Think about your personal brand and how you have, in the past, managed to leverage that personal brand to generate income for yourself and your family. Now take a look at your situation right now, at this moment, and identify what income streams have you managed to build for yourself up to this point.

Ok.

Done?

Right. Now write down those income streams on a piece of paper and write down how much you make from each income source per annum. Now you have a better idea of where your money comes from. In most cases, you will have only one source of income – which is fine. Most people don’t have multiple side hustles running alongside their full-time job. 

If you have identified your income streams and put an income value to each stream, you need to be honest with yourself and give each income stream a risk rating. You need to rate the security of that income stream (or job, as would be the case) in this current economic climate. On a scale of 1 to 5, with 1 being very insecure to 5 being very secure – rate your income streams.

Ok?

You should have something that looks like this (using my income streams as of 31 March 2020 here as an example):

Awesome. Now that you can clearly see where your money is coming from, we can move on to the next step which is:

No.2: Secure your income stream(s)

This is easier said than done. You need to secure your income streams. If you are an essential worker – good news, you are unlikely to get laid off or retrenched in the COVID-19 financial crisis (especially if you are a healthcare professional). So if you fall into this category, you don’t have much to worry about, except for potentially catching COVID-19 since you are more exposed than non-essential workers are – but I’m a doctor with a PhD in Finance, not medicine so I really can’t give you advice on that area.

But for the rest of us (accountants included! We’re not very essential apparently!) we need to start thinking about how to secure our income streams. Now there are a few ways of going about doing this so let’s look at two tips for securing your income streams.

Talk to your employers

Apart from cash flow management, I’m also a big fan of talking and communication. If you haven’t had the job security and performance talk with your employers – you should arrange for one immediately. If you have the good fortune of being employed by proactive employers who have already had this talk with you – congratulations, you are one of the lucky ones! 

If you are not as lucky, you will need to show initiative and talk to your bosses. Ask them for their availability, set an appointment and ask them some really important questions like:

1. How would you rate my performance on the job thus far?
2. What sort of plans are you looking at with regards to the financial crisis?
3. What can I do to further contribute to this business and secure my position at this company?

Yes, they really are big hairy questions and you will be putting your employer on the spot. But these are totally, completely acceptable questions to ask them. Any decent employer would be able to give you an honest answer. If they don’t then, well, it might be a good idea to look for other jobs now before it is too late. Don’t be afraid to ask them these questions because sitting around and hoping for the best is not a valid strategy in these times. Security comes to those who are proactive and show initiative!

Bump up your side hustle(s)

You got a side hustle? Welcome to the club! If you have a side hustle like I do (did? – it is my main hustle now I guess?) and things aren’t looking so hot on your employment end, then it is a good idea to start looking at bumping up your side hustle game. I can’t give any specific advice on how to bump up your side hustle, because not everyone is running a finance/accounting/comic blog/PWYC accounting & coaching  service like I am but I can offer a few generic tips:

1. Think about what you need to do to make your side hustle your main hustle – if you lost your job tomorrow, could you make your side hustle your main hustle?
2. How can you increase the number of customers/contracts for your side hustle – in all likelihood you are now working from home (thanks lock down!) and have the freedom to explore these options during the day.
3. How can you adapt the offerings of your side hustle to work around the limitations of any lock down or movement control order that is present in your location?

If there was any time to seriously consider increasing your side hustle game, now is the time. Employment is not as secure as it used to be for non-essential workers and if you fall into this category you need to start thinking about what else you can do to support yourself should you suddenly find yourself out of a job.

If you are looking for some ideas for side-hustling here are a few areas you could look into:

1. Online book-keeping (hey, that’s what I do too!)
2. Virtual assistant
3. Uber driving (post-lock down)
4. Lime juicing (post-lock down)
5. Filling out online surveys
6. Drop-shipping (post-lock down)
7. Blogging (blogging is a really cool way to make some side money!)
8. Become a youtube star (good luck!)

Ok, so there are like, 101 ways to start a side hustle and I’m not going to discuss them all in this post. My point is that you can’t be 100% reliant on your employment income as there is so much uncertainty in the employment market at this point. So start cracking and start thinking about how you can market your personal brand through your side hustles!

No. 3: Find out what benefits you can apply for

This advice will vary depending on which location you are based in. If you are NZ based – know that your employer can apply for the wage subsidy for you – guaranteeing you at least $7,026 (gross) for the next 12 weeks of full time employment. This applies to all employees of any NZ based organisation and self-employed individuals as well.

If you find yourself being made redundant – WINZ has a very handy guide to determining what sort of benefits you are eligible for. Note that if you are here on a work visa like I am, you cannot apply for any of these benefits (shame, but them’s the rules).

Many governments around the world are offering some sort of financial assistance to their citizens that have been affected by the COVID-19 crisis. Off the top of my head, here are some of the assistance packages that I have heard of around the world:

1. Malaysia – Cash aids to individuals with amounts varying depending on their personal situation.
2. Singapore – COVID-19 support grant to individuals who lost their jobs and Self-employed individuals whose income is impacted by COVID-19.
3. UK – Statutory sick Pay support for individuals and support for employers with employees on sick leave.
4. Australia – Coronavirus supplement or Economic support payments for individuals affected by COVID-19.
5. USA – Economic impact payments which are one-off payments to all eligible tax payers.

Looking for aid packages in your country? Search up ‘*Your Country Name* COVID-19 Financial aid packages’ and have a look through to see what financial aid you can apply for. As with all things, if you don’t ask for it, you won’t get it. So even if you are unsure that you can apply for a benefit, just do it anyway! The worst that can happen is that you get rejected. After all, you will never know if you don’t try.

No. 4: Manage your cash!

Ok, so I really am sounding like a broken record right now. Manage your cash, watch your cash flow, keep track of your cash.. Bla bla bla. But yes, I have said it before, I will say it again and I will keep repeating it until the day I die!

MANAGE YOUR GODDAMN CASH!!

To this end I advocate the use of cheap, easy to use accounting software to keep track of your income and expenses. Do not underestimate the power of being able to keep track of your finances. It can be very scary starting out, but once you get into the habit of doing it, you will start to subconsciously know how to spend your money more wisely and on things which are really important to you.

How does an individual manage their cash? The same way a business would manage their cash – using a cash budget. I have covered cash budgets in this blog post here – so go on and read that if you haven’t read it. Nowadays, you can use accounting software like Pocketsmith to manage your household budget (It’s the same software I use and I highly recommend it). But If you are looking for a free monthly cash flow template for an individual/household, good news, I’ve developed a new template for you right here – so get cracking!

Why is cash management important?

I’m glad you asked. 

Cash is the representation of the exchangeable value that we hold that we can use to trade for goods and services. In other words – it gives us buying power. In this time of economic uncertainty, we want to make sure that our cash is well-spent. Which means that we want our cash to be going into essential items like food, rent and power (not rolls upon rolls of toilet paper!). Whatever cash we have left over we can set aside a small percentage for luxury purchases (board games for me!) and investments into suitable investment vehicles (more on this later). So you see, having a cash budget does not mean you have to sacrifice on luxuries like chocolate, games and travel (yes you can travel, when the rest of the world stops burning) but it means that you have more power and control over how you spend your money. With a cash budget, you can actually direct your money into things that you need AND things that you want. You want to make every dollar work for you, not the other way around!

No. 5: Upskill yourself!

This tip is probably closely related to tip No. 2: Secure your income streams. However up skilling is more than just making yourself marketable – it is about making improvements to yourself as an individual. So I’m going to be moving in to some hippy-dippy self-help nonsense in a few more sentences – if that does not spark joy in your life or makes you feel complete and whole, then you have the power of choice to choose to not continue with situations that do not bring you happiness.

Jokes aside guys, seriously, you need to upskill yourself.

Take a look at your income streams again and let’s add in another scale of 1 to 5. 1 being low skilled, 5 being highly skilled. Honestly rate your skill level in that field from 1 to 5, taking into account any new developments in your field (such as cloud-based accounting for us accounting types and takeaway-only ghost kitchens for those in hospitality). Don’t know what the latest developments are in your field? Then you’re definitely NOT a 5 in that field. Get out there and start researching!

I can’t say much for other industries but I can certainly speak for the accounting industry. These days, accountants cannot just be bookkeepers and account balancers. Anyone can do that. Thanks to accounting software like Xero, MYOB and Pocketsmith, basic accounting is now more accessible than ever. Thanks to the ease of information sharing on the internet and over-enthusiastic bludgers like me who are passionate about teaching other people how to account for their stuff for free, accountants of old are slowly dying out. So what does that mean for the rest of us? It means that accountants need to gain skills in other services such as business coaching and planning. They need to learn how to work with the latest accounting software in the market, meaning that they need some basic grasp of IT and how cloud-based software works. Data analysis is becoming more important as accounting roles are being replaced by financial analyst roles. Businesses don’t need someone to keep track of their accounts anymore – they need people who can interpret financial data and coach them on how to action on that data effectively and efficiently.

So have a think about your industry again. What are the latest developments? What are your personal strengths and passions? What new skills do you need to develop to stay ahead of the game? Make a list of the things you need to learn, go online and find out where you can learn them from.

Now is also a good time to re-write your CV/resume and boost up your profile on LinkedIn. You should also be engaging and networking with other people within your field. This way, even if you lose your job, you are better positioned to find a new one when economic conditions start to become better.

Technical skills aside, being in lock down also gives us individuals the opportunity to read up on some good life-hack books. I like to call them life-hack books because I’m a friggin’ millenial and ‘life-hack’ sounds cooler than ‘self-help’. Don’t discount the power that these books have. While personal mileage may vary, you will still learn some cool new skills that will allow you to change your perspective on life, focus on the important stuff and most importantly – get stuff done. Some of the books that I have found to be quite pivotal in my life are:

1. The 7 habits of highly effective people – by Stephen Covey
2. The power of habit – by Charles Duhigg
3. How to make friends and influence people – by Dale Carnegie

There are many more books in the same vein that you can read up and benefit from. Have a look on youtube as well for some inspirational, motivational stuff too. But remember that all the motivation in the world means nothing if you are not disciplined enough to act on it!

Wow, that was a long article. Probably the longest I’ve written for this blog so far. But wait! I’m not done yet! I hear you have questions, so let’s have ‘em!

Is this a good time to be investing in property?

Just a friendly reminder, I’m Sam Harith The Comic Accountant. Not The Comic Real Estate agent. So honestly, this is really outside of my field of expertise. But I can give you some general advice. 

If you are looking at buying your first home – now is actually a pretty good time. Speculative property investors are spooked because they are unlikely to make short term gains from properties and you may find a few motivated sellers in the market. Banks in general are also lowering their interest rates so you can find better home loan deals in the market. Bear in mind that whatever debt you take on, you need to be sure that your income streams (see above) are secure enough to support any future repayments.

If you are looking at buying for investing – It depends on how long you are looking to hold the property for. If you are looking to flip properties to make a quick buck, now isn’t the time to do it for obvious reasons. For more information, contact your local real estate agent.

If you are looking at buying for renting – again, not a great time to be doing it. My financial and business sense tells me that many retailers and restaurants are going out of business, meaning that there are fewer businesses left to pay rent on commercial properties. Professional services are also starting to get their staff to work from home – so the future of commercial property tenants are dubious at best. For residential properties, some landlords don’t have much of a choice but to allow tenants who have been laid off stay rent free for a couple of months. Don’t expect that you will be able to get willing and paying tenants in this current economic condition.

Is now a good time to be jumping on the stock market?

Well, seeing as I’m not The Comic Hot-tips Stock Trader I’m really not the best person to be commenting on this. But I will tell you the same advice that I give to myself:

1. Never invest in what you don’t understand
2. Never invest more than what you are prepared to lose
3. Never feel like you are losing out if you choose not to invest

Broadly speaking there are two ways of investing on the stock market:

First is what I like to call the sexy method – picking stock up when they are low and selling them when they are high. There is so much literature out there on this subject that I’m not even going to get into it. The basic premise is that you need to do a butt-ton of research on individual companies, calculate what their price should be, see if the current market price is below that calculated price, invest in the company and watch it everyday so that you can sell it off when the price is right. I’m not going to rag on this method – some people have gotten rich doing it, but it is a lot of hard work.

Second is what I like to call the boring method – invest in an exchange traded/index fund. Plonk your money with providers like Superlife, Simplicity, Vanguard etc and trust them to do the investing for you. ETFs are different from active fund managers in the sense that they are a whole lot cheaper and you still get roughly the same returns over a 10 year period. Emphasis on the 10 year period there – you are not going to get rich fast with this method but it is a great and reasonably secure way to put away some money for the far future.

Personally, I don’t have the capital for investing the sexy way (I’m unemployed, remember – plus I haven’t quite grown my side (main?) hustle’s income stream yet). However I do feed a small amount of funds into Superlife every week through their funds, so I get to benefit in a small way from any movement in the stock market. 

Also, P.S. Don’t buy that hot stock tip that your drinking buddy Brad told you about. Heck, don’t ever buy any stock without at least researching the company’s finances, history and growth prospects. Remember – never invest in anything that you don’t understand.

Should I be cashing out my Kiwisaver/EPF/ASB/Superannuation Fund or move it into conservative cash funds?

Ask yourself this one question:

‘Do I need the money RIGHT NOW – at this very moment?’

If you answered yes, then I wish you all the best. There’s not much I can do for you.

If you answered no. Then leave it where it is.

Remember how I said that recessions are cyclical? Yeah. Right now we are going through a down phase in the global economy. But the great thing about down phases is that they are often followed by an up phase. Years of historical financial data tells me that in the long run, markets have a way of bouncing back and rising to levels even higher than pre-financial crisis levels. 

Yes, I know, you look at your super accounts and you’re thinking:

‘OMG – I’m losing so much!!’

But look, you are only losing on paper – if you cash out your funds, then you will be making that loss official. If you keep your funds in your accounts and keep making the regular contributions, you will find that they will rise back in a couple of years or so. 

Ok then , ‘But what about moving my fund into conservative/cash funds?’

Chill. The markets will recover eventually. 10 years from now, you will have the same amount in your fund regardless if you switched to conservative now, then back to growth later or if you just kept your funds in growth all the way. The risk of switching your fund to conservative is that you might forget to switch back to growth once the economy has recovered and then you REALLY are missing out on some good, long-term growth from your funds.

So yeah, do yourself a favor, stop looking at your superannuation balance and focus on securing your income streams instead!

Should I start looking for a new job?

Uh. What?

Look, focus on securing the job you have now. Not a lot of jobs are being advertised out there these days. But if you feel insecure in your current job and/or you are looking for a career change, then yeah – take the plunge and do it. 

I would like to add a major caveat here, and this one is for NZ employees who have received the wage subsidy through their employer. If you have received the wage subsidy through your employer – know that you will stop receiving the subsidy if you leave before the end of the 12 week period. Also, the chances are high that you cannot receive the subsidy again through a new employer (assuming you can even get hired) as they would have already made their application and they can’t make more than one application, unless it is to top-up the subsidy for existing staff that weren’t included on the first application.

I’m feeling lonely and anxious in lock down, what can I do?

Ok, I know this really great counselor who does online seshs for people who are affected by the lock down and are looking to talk. She’s really awesome. Book an appointment with Yana today. 

That’s about all I have for you today. And it really is quite a lot. Do you have any questions that I can help you with? Flick me a text on FB or send me an email at sam@samharith.com. I’m more than happy to help you with any financial/accounting/tax issues you might have.