There is no doubt that the COVID-19 global pandemic has been a sudden and unprecedented assault on the health and personal finances of people around the world. As someone who has studied connections between health and wealth for two decades, I’ve recently noticed one additional thing that these two aspects of our lives have in common.
Underlying conditions make crisis events worse. It happened with the Great Recession in 2007–2009, which was an economic crisis, and it is happening again in 2020 with COVID-19, which is both a public health and a financial disruptor.
On the health side, medical experts frequently note that age and “underlying conditions” increase a person’s risk of contracting and dying from COVID-19.
Specifically, they are referring to people age 65 and over and those with medical conditions such as asthma, obesity, chronic kidney and liver disease, and diabetes. People with these risk factors may be more likely than others to develop a severe illness, need hospitalization if they contract COVID-19, and have poor outcomes.
Similarly, on the financial side, there are underlying conditions that increase the odds of poor outcomes as a result of coronavirus-related income losses.
These conditions include no or low emergency fund savings, overspending, high outstanding debt (i.e., a consumer debt ratio of 15 percent or higher), income volatility, and a lack of social support to help in the event of an emergency. Like underlying health conditions, these underlying financial issues make COVID-19 even worse.
Making an Action Plan
What to do? Develop an action plan to address your personal underlying conditions. I will leave it to the health experts to suggest ways to address underlying health issues (except age, which, of course, cannot be changed). Below are six ways to address underlying financial issues and boost your “immunity” to negative economic fallout from COVID-19:
- Change What You Can: Do what you can with what you have. For example, prepare or update a budget that reflects your new economic reality and change your shopping habits (e.g., buying store-brand foods). All small steps matter.
- Save the Extra: Save part of your federal government stimulus payment to hedge future economic uncertainty. Ditto for part of the extra $600 per week in unemployment benefits that is available to laid-off workers through the end of July.
- Make Double Minimum Payments: Pay 6 percent of the outstanding balance on credit cards, instead of the typical 3 percent minimum payment, to get out of debt faster and pay less interest. Pay even more when you have additional income.
- Create Multiple Income Streams: Consider ways to earn money from a side hustle that can be performed at home. Update your profile and résumé on LinkedIn so they can be accessed easily by potential employers.
- Review Your Insurance and Estate Plans: With over 60,000 Americans dead as a result of COVID-19, this is a good time to review your health and life insurance coverage and have a will in place to dictate how your assets will be divided.
- Assess Your Resiliency Resources: Take this online quiz from Rutgers Cooperative Extension to identify your resiliency strengths and weaknesses. Develop plans to shore up your resilience on items that you answered “no.”