We are already halfway into the novel coronavirus pandemic! According to the International Monetary Fund, it’s the “worse recession” after the 1930s Great Depression. Countries and also states worldwide are finding ways to fight the virus and also save the economy from sinking. Prolonged lockdowns are not the best option for several countries. But to flatten the virus contamination curve, one has to say yes to lockdowns and also social distancing norms. Some of our current realities include struggling businesses, pay cuts, zero recruitments, and also unemployment rates.
Eric J Dalius shares three financial lessons
Similar to any other economic recession, our current condition brings us critical financial lessons. Eric J Dalius, an entrepreneur and philanthropist, shares three crucial financial lessons:
- Save emergency cash before investing
The investments are smart ways for inflating capital and also saving. However, not every option available offers instant liquidity during an unwarranted crisis. During a financial crisis, everything goes haywire, and also there’s no stability. Hence, without apt support, businesses will land up getting bankrupt. Emergency funds are crucial as they provide you with the time and also resources to bounce back to action, even when you have lesser income. The current global pandemic is here to last for a while now. Hence, it’s best to save for the remaining year and also keep an emergency fund ready.
2. Customer credit must be less in your portfolio
Today, several businesses have to pay over 30% to 50% of their income as loans. During an economic crisis, there are chances of pay cuts and also job losses. Hence, paying the loan amount and also other debt will pose a challenge. Banks are offering temporary relief funds, but that will not solve this issue.
The financial lesson that we need to learn is not to take credit more than required. According to business experts, fixed credit payments should not be over 20% to 30% of the overall monthly income. However, the lesser you can use and also survive, the best for you and also your business’s future. Have you taken a business credit loan? If yes, the repayments should not comprise a huge chunk of the monthly revenue.
3. It’s essential to invest in health insurance
The novel coronavirus is leading to severe respiratory issues by infecting the respiratory tract. And also to heal from this infection, patients have to stay in critical care that has life-supporting devices. The treatment usually takes a few weeks and also involves many medical tests for detecting the virus. Recoveries vary from one person to the other. Hence, start-ups and also other business owners should invest in health insurance. Concerned companies can’t provide health coverage because employees are called to the office to work. It is personal finance management that business owners and also others have to do.
It is not the time to make sudden short-term decisions. Your business cash is essential for you to survive during a crisis or emergency. Think of investments and also their long-term benefits and also make an informed decision. Companies need to take a realistic look at their financial health during a pandemic or crisis. The three lessons discussed above will help organizations decide better.