4 Steps You Must Take Now to Financially Prepare for the Coronavirus

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It’s official: The World Health Organization has officially declared the current coronavirus outbreak a global pandemic.

That doesn’t mean it’s time to panic. That’s neither necessary nor advisable. But a little planning now will really pay off if things take a turn for the worse later.

There’s plenty of information circulating about how to protect yourself and your loved ones from the virus itself. This article is about protecting your financial life, including general preparations, dealing with your investments, avoiding virus-related scams and what to do about upcoming travel plans.

We hope a lot of this cautionary advice proves unnecessary. But even if this turns out to be a drill, lessons learned now will come in handy the next time financial uncertainty rears its ugly head.

Step 1: Prepare for tough times

There’s no question COVID-19, the official name for “coronavirus disease 2019,” has already done major damage to the world economy. Many experts think we’re heading for a recession, which is defined as a period of negative economic growth, marked by things like rising unemployment and tight credit.

It’s now been more than a decade since this nation’s last recession, which means there are American workers too young to remember its effects, as well as others who may have forgotten them. So, here’s your wake-up call.

When tough economic times are ahead, an ounce of preparation is worth a pound of cure. Check out articles like “9 Steps to Brace Your Finances for the Recession Ahead” for details, but the basics are:

  • Avoid major expenses: Until things settle down and the future becomes clear, it’s best to postpone buying things like cars, houses, expensive vacations or other major purchases.
  • Spend less: Pay attention to where your money is going and do the best you can to eliminate unnecessary spending. There are dozens of articles on this site that can help, from “15 Golden Rules for Saving on Every Purchase” to “5 Monthly Bills You Can Easily Negotiate Down.” Just go to the top of this page and search for the word “save.”
  • Increase your savings: There’s nothing more stress-reducing than a nice, fat cash cushion. Build your savings and put it in places it will earn the most interest. If your bank is paying next to nothing, it’s time to try a different one.
  • Pare down debt: If there was ever a time to destroy your debt, it’s now. Check out articles like “7 Great Tools to Help You Get Out of Debt” or head to the search box at the top of this page and enter the word “debt.”
  • Create new income: Options range from traditional part-time jobs to entrepreneurial side jobs. Online gigs are especially good right now if you want to avoid unnecessary exposure to the public. For ideas and inspiration, see “107 Easy Ways to Make Extra Cash.”

In short, lean and mean is the way to approach an economic downturn. The more cash you have, the more options you have.

Step 2: Protect your savings

I recently wrote “How to Protect Your Savings From the Coronavirus.” Here’s some advice from that article for stock investors:

  • If you’re investing monthly through a 401(k) or other retirement plan, and have decades until retirement, you’re in fat city. Stocks are on sale and may get cheaper yet. Don’t change a thing.
  • If you’ve got money on the sidelines, keep it there for now. Nobody, and I mean nobody, knows where this is going. Keep some powder dry.
  • If the suddenly volatile stock market has you in a panic, you have too much money in the market. While this coronavirus is unique, sudden sharp declines in the stock market aren’t. Consider this a lesson and allocate accordingly. Here’s my advice on how much to have in stocks.

For those who have their savings in the bank instead of stocks, keep in mind that, should a recession occur, already-low interest rates are likely to go even lower.

That’s what governments do when recessions threaten: They prime the economic pump with lower interest rates.

So, for a portion of your savings, you may want to lock in rates now with a certificate of deposit (CD). As I write this, you can still lock in a CD interest rate of close to 2%.

I know, nothing to write home about. But it’s probably a higher interest rate than your savings account is paying — and it likely will look good if the economy tips into a recession.

Step 3: Beware of scams

Anytime there’s a crisis, there’s a thief trying to capitalize on it.

The Federal Trade Commission has issued the following warnings:

  • Don’t click on links from sources you don’t know. Doing so could download malicious software onto your computer or device.
  • Be wary of emails claiming to be from the Centers for Disease Control and Prevention (CDC) or experts with information about the coronavirus. For the most up-to-date information about the coronavirus, visit the websites of the CDC and the World Health Organization (WHO).
  • Ignore offers for vaccinations. Currently, nothing can treat or cure the coronavirus disease 2019 (COVID-19).
  • Do your homework when it comes to donations, whether through charities or crowdfunding sites. Don’t let anyone rush you into making a donation. If someone wants donations in cash, by gift card or by wiring money, don’t do it.

In addition, the FTC is going after companies and individuals claiming they can treat or prevent the virus. Companies the FTC has warned include:

  • Vital Silver
  • Aromatherapy Ltd.
  • N-ergetics
  • GuruNanda LLC
  • Vivify Holistic Clinic
  • Herbal Amy LLC
  • The Jim Bakker Show

There’s nothing lower than trying to take advantage of people at their most vulnerable. Don’t give a scam artist the time of day.

Step 4: Travel prep

Travel is one of the more stress-inducing parts of the coronavirus outbreak. Here’s what you need to know if you’ve already booked travel, as well as some advice for those who are thinking about booking travel in the near future:

If you’ve already booked

If the airline cancels your flight, you’re obviously eligible for a full refund. But if you’re simply feeling a bit queasy about getting on an airplane and want to postpone your trip, you’re likely in luck.

You may be able to postpone your trip without cost. Most airlines are offering flexible re-booking policies, although not universally or consistently. Also the rules and applicable dates are changing rapidly. So if you want to postpone your travel, your best bet is to reach out to the airline and explore the options that apply to your specific ticket.

Here are the customer service numbers to four major airlines, along with links to their change policies.

What about cruises? Same basic routine. Now that the CDC has recommended that “travelers, particularly those with underlying health issues, defer all cruise ship travel worldwide,” cruise lines have become very flexible regarding changing your plans.

That being said, policies and procedures differ. Some are allowing you to cancel within 48 hours of your disembarkation date and get a credit you can use within a year.

Here are the customer service numbers to four major cruise lines, along with links to their change policies.

If you haven’t booked

If you’re thinking about a cruise, hold that thought. There’s simply too much uncertainty around the cruise industry at present. Wait for the coronavirus to be contained and the world to become more normal.

If you’re thinking of planning any other kind of trip, however, you’re likely to find a ton of bargains as airlines and hotels compete for the vastly reduced number of travelers.

The downside, of course, is the uncertainty you’ll face as the pandemic unfolds.

Before booking, use the information above to contact the airlines and check their change policies. Same with whatever hotel you’re considering. If your desired hotel won’t offer concessions, your only remedy is to get a refundable reservation.

Tip: Since these policies are fluid, take a screenshot or print out the change policies when you book, so you can provide proof of the policy in place when you reserved your travel.

Travel insurance

There are travel insurance policies that allow you to cancel for any reason, but they’re expensive and getting harder to find. Traditional policies won’t reimburse you for known travel issues, which include the coronavirus.

I hope that advice helped. As things change, we’ll update or expand our coronavirus coverage, so check back often.

What steps have you taken to prepare financially for the coronavirus outbreak? Let us know by commenting below or on our Facebook page.

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