“When spider webs unite, they can tie up a lion”, goes an African adage. This piece of wisdom from our ancestors fits the life of Derrick, a financial controller in a growing family business, and the backbone of the family legacy. His primary responsibility is to ensure that the company remains liquid for future development.

At the start of the COVID-19 pandemic in March, Derrick had long adopted frugal spending practices, collecting and saving monies that would pass as the web of small monies from his financial frugality that enabled the family business to remain solvent throughout the lockdown re-ordered competitive economy.

The series of lockdown measures adopted by many countries following the COVID-19 outbreak has led to a very challenging financial meltdown for many businesses globally as well as for individuals. The severity of the effect of the financial impact on individuals in the fledgling economies in Africa can be likened to the dot-com bubble burst in the US economy in early 2000, which led to a prolonged period of recession.

During this lockdown, many individuals and families have experienced financial agonies due to the massive fall in revenue directly linked to a sudden reduction in demand for products and services. This, thereby, has increased the feelings of uncertainty about the future. 

On the brighter side, in this article, Human capital International offers four research-based strategies to help you mitigate the financial imbalances in these uncertain times and afterward.

The effects of Covid-19 have wreaked financial havoc for many people in Africa, especially for those that did not have contingency measures, and therefore had neither savings nor emergency funds.

According to a World Bank report, poor saving culture is endemic in sub-Saharan African, and it is not surprising COVID-19 caught many off-guard without savings.

A 2018 report by the Financial Sector Deepening Uganda (FSDU), done in partnership with the FinScope Secretariat – Bank of Uganda, collaborates the World Bank report. The FSDU report underscores the importance of prudent financial management skills that individuals need to mitigate difficult times such as this.

The question to ask yourself following this financial meltdown, is “how should I prepare to survive any such future recessions?”

The underlying point of this question is that to make one’s financial health as resilient as possible during any future economic disruptions, requires deft financial management skills, and readiness. Indeed, the game-changer in all of these is adequate planning.

Follow these strategies to make the best decisions possible regarding your finances during this period of crisis.

1. Start with a savings “Mind Sight” 

To develop a very solid financial plan against any future economic disruptions, start by spending time to think about a clear financial picture for yourself. Statistics show that 85% of the world population work just to pay bills, each day going to work, and mostly to get through the day. Rarely do people make time to think about why they are working, what will happen in their old age, and in the event of any sudden health or economic challenges. Aside from understanding your usual living expenses and incomes, pause to reflect on developing a vision of what you want your life to look like financially in the future.

Related article: Twelve money mistakes you must avoid if you are to succeed financially.

To some people, it is hard to push themselves to save, but it’s often much easier if you have a financial “mind sight” that you are working towards. Start with the vision of setting up an emergency fund account to fall back on; one that can cover at least three months of your living expenses. Do this by setting aside some money into this account every month. That way, there will be less stress if there is a crisis, and you aren’t able to work for a while.

2. Develop a good Cut, Save and Invest habits

Abraham Lincoln once said, “you cannot escape the responsibility of tomorrow by evading it today”. One of the foremost secrets of individuals who can survive financial downturns, and long periods of recession, is their expertise in cash flow management; their unique skills and abilities in understanding the dynamics of money, and how to creatively regulate the inflow, and outflow of their cash to even earn additional income. To be successful in today’s new normal economy, you should be able to control the direction in which your cash flows, and be responsible for the changes that need to be made in the “income and expenditure column” of your cash flow statement.

The philosophy of most who survive sudden financial downturns has been to guide the directions of the “dimes”, “shillings” and pennies” that bring in the “notes” with the understanding that it is the small additions on their savings, or investments, and how long they keep it that eventually determines their financial stability. They have adopted the attitude and discipline of controlling their appetite and expenses, and instead direct that corresponding percentage of their salary or income to their investment accounts.

Remember that every great financial accomplishment comes with a price, and until you learn how to budget for your coins, pennies, and shillings, and develop an active interest in long-term savings, and investments, it will be difficult to pull yourself up out of this post lockdown challenges, and any other financial meltdown.

3. Manage your expenditure with both head and heart.

When it comes to money matters and the ability to create long-term financial freedom, it is mostly about managing your emotions. In this re-ordered competitive environment, if you must be able to manage your finances successfully and survive any future financial turmoil, you must of necessity learn to approach your spending habits with both heart – emotions, empathy, and head – deft financial management.

Before you make any expenditure, remember that being a successful money manager requires a lot of deep thinking and critical analysis. Although it is a fact of life that there’s no easy formula for separating money from emotions, in general, the fewer knee-jerk money decisions you make, the better.

This article will interest you: Four strategies to Avoid Being Jobless in The New Normal.
Generally, any financial management class 101 will teach you that having emergency funds stocked in the bank makes you feel a lot less financially stressed when uncertainties arise than if you don’t. That’s why it’s essential to maintain at least three to six months’ worth of living expenses in liquid cash in a secured savings account.

Therefore, try making money decisions – especially about what, when, and at what price you purchase anything – by not letting your emotions get the best of you. Never allow your taste, peers, or lifestyle pressures to lure you into dipping your hands into your emergency fund. Not for any reason.

It is always prudent to enforce a waiting period of about one month on yourself before making any large-scale money decisions. This allows you to involve your head and not just your heart in the process.

4. Be ready for transformation and embrace digital budgeting tools.

To mitigate the effects of the financial impact of the lockdown on your finances, budgeting, and improvement in other areas of financial literacy is critical. Financial literacy resources have recently seen a massive transformation. There’s been a migration from check book balancing, and excel-paper budgets to free and easy online tools such as Mint, Personal Capital and Pocket Smith, that can help you to synchronise all your financial transactions, records, and accounts in one place, and be able to track all your expenses, create savings, and build budgets. 

These are digital tools that have transformed the personal financial management space and made it easy for enhancing financial literacy for the creation of personal and generational wealth.

Therefore, while it is not certain when the pandemic will end, it is prudent to take steps to develop a three-phase financial strategy (respond, recover and rebound) to address your current personal financial meltdown and lift yourself. Each one needs a plan:

• Respond—as an individual, maintain a semblance of normalcy amid the challenge while expecting adjustments in work practices, contraction of revenue or income, and uncertainty about making big investments or expenditures.
• Recover— life is unpredictable so make the effort to review your budget and your spending habits. Save more, and find ways to reduce your bills.
• Rebound—a changed spending behaviour, along with new lifestyle models and upgraded financial management skills, will give you a competitive advantage to rebound financially. No one can predict how long this financial crisis will span. Therefore, start a plan now, and even a second or a third one, so that your actions through the earlier phases can set you up for success in this drastically altered and competitive economy.

To quote Stephen Wunker lets us “guide our near-term actions with a clear view of how the world will be different once we emerge out the other side.”