The economic disaster that was created by covid-19 isn’t over yet, here is what to do
The economic disaster that was created by covid-19 isn’t over yet. Countries are devaluing their currency to accommodate for this already. What it means is that cash will lose value anywhere you keep it: in your wardrobe, in that savings app, or in that bank account. We have already seen transport fares jump 200% in certain locations.
1. If you are keeping cash in your bank account, you will get crushed. By the time you want to pull it out and use it, you will see that it can no longer buy what it could buy before.
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2. If you are among the bottom 20% to 30% income earners in the society, you will get hit badly because people in this category don’t have many assets. They only have little cash to live on from day today.
The inflation that will be experienced by these people will be through the roof compared to people that are a little richer. It is estimated to be anywhere between 6% to 20% depending on the country.
3. What rich people did that made them rich during the pandemic was to quickly pull out their money from the banks and invest in assets: stocks, bonds, mutual funds, cryptocurrencies like bitcoin, and even properties like lands.
That is why bitcoin prices grew several folds during the pandemic. If you missed that window in March to invest in bitcoin, I have no advice for you. Consult your financial adviser to find out if it is still safe to invest now or already way too late. One of the many reasons dollars became scarce is that lots of rich people bought dollars and kept it in cash instead of keeping their money in the bank.
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4a. If you are at the bottom 30% income earners in this society what can you do?
The answer is simple, prepare for a cash crunch. And the rule of thumb for this is, spend less than you earn. Avoid big expenses until the end of the year.
4b. What do you do with the money you saved by living on less? Invest it in assets so it can guarantee that you will have money coming in during the difficult times. With money saved up, you have more time and room to think and make better financial decisions.
4c. Invest in multiple streams of income. Lots of more jobs will be lost, even the one you think is very stable now might surprise you someday. Quit attacking motivational speakers and actually start trying out some of the advice on multiple streams of income. Be careful though, since the economy is going bad, more scammers are on the prowl. Some masquerading as investment opportunities while some come through as training opportunities.
If you have multiple sources of income, it becomes harder for inflation to wipe out your means of livelihood. I know a family-run restaurant that started using the front of their restaurant as a gym. Now they are earning from the gym while also earning from the restaurant. People exercise, pay a fee to freshen up in their bathroom, then get into the restaurant and ear healthy.
4d. Again, get out of cash and move into assets, more accurately, investable assets. As inflation rises and the economy worsens, the value of investable assets will keep rising. It’s a mirror effect.
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