How to catch up after the crisis we are experiencing

Public health officials are telling Brazilians to avoid personal contact, including commuting to – and working in the workplace – in hopes of subduing the coronavirus outbreak. As medically necessary as these steps are, there is a flip side to huddling around and avoiding the outside world for the foreseeable future: Large swaths of the economy are grinding to a halt. And since this is a global pandemic, the same thing is happening virtually all over the world.

The corona pandemic has had a major impact on the global economy by disrupting supply chains. The exact scenario cannot yet be predicted, but a global recession is becoming more likely.

The only thing certain is that there will not be a simple “return to normal”.

Indeed, the more the SARS-CoV-2 virus spreads around the world – there are more than 300,000 cases of the related COVID-19 disease as of this writing – the greater the concern not only for our health, but also with our livelihoods.

With millions of people in Brazil and around the world in virtual lockdown, a ripple effect across the economy is inevitable.

Certainly, specific industries bear the brunt of the damage. Shops and restaurants start to get empty, if they don’t completely close their doors. Non-essential travel declines, reducing revenue not only for airlines and cruise ship operators, but also for smaller companies that rely on tourism revenue. The list goes on.

Can government intervention help?

In an ideal scenario, legislatures and central banks would use the power of the stock exchange to help mitigate an economic crisis. But these measures may prove less effective during a pandemic.

For example, efforts to open the Treasury and send money directly to families can help people who have lost their jobs or seen reduced work hours. But some experts argue that the impact is muted if many of the people who receive the funds cannot spend it – after all, many shops and restaurants are closed.

And interest rate cuts, intended to boost liquidity at a time when cash is tight, may lose some of their potency when rates are already noticeably low.

Preparing yourself financially

The best way to solve this type of problem is to have a plan of action.

Thinking about reducing your debts a little at a time as soon as you have little availability or simply based on luck will get you nowhere.

Sorry, trying to win the scratch card or lottery is a waste of time and more money!

You have to roll up your sleeves and face the chest problem.

Putting it off, procrastinating, avoiding it… are all ways to find the debts there, ready to wait for you, bigger and fiercer than before.

To get out of the debt vicious circle, you must therefore change your attitude.

If you’ve always behaved the same way and it’s given you these results, it’s time to try to rearrange the cards and go in a different direction.

Your new actions should lead you to reach the debt virtuous circle.

While pandemics can cause significant economic damage, at least in the short term, there are steps people can take to protect themselves as much as possible. Here are some of the measures you can consider when a pandemic strikes:

Build your emergency fund

Conventional wisdom dictates that you have three to six months of expenses readily available in your bank account at all times. A pandemic is one of the scenarios it is intended for. So if you’re a little short of what you expected, now is the time to increase your reserve if you can – you never know if you might need it.

Dust off your resume

With less demand, some companies won’t be able to keep their entire staff on the payroll. If you work in a hit industry, now is the time to start looking for other job opportunities. Start connecting with people who can help with your job search, and make sure your resume is in good standing.

Reach out to creditors

Those who have already seen their income drop as a result of a pandemic may find it difficult to pay their bills, rent or student loans. Since so many people will be affected, lenders and landlords may be more willing to accommodate you than they would otherwise. The worst thing you can do when you miss a payment is keep your creditors in the dark.

Rationalize expenses

You must necessarily review your spending habits to recover useful margin to be used to deal with some of the techniques described below.

Clearly, it’s not an easy thing, I understand, but it’s absolutely necessary.

The secret is to pay yourself first. Once you receive your application form, reduce it to the amount you want to use to settle your debts. In this way, you will be forced to revise subsequent expenses, in order to survive.

Also because your goal is to seriously save money without having to cut everything and without a feeling of guilt.

No more debts

If you want to reduce and cancel your debts, avoid opening new ones to pay off old ones. Continuing to do this is like a dog biting its tail; it will never come to an end.

This method is very dangerous, because the more debt you accumulate, the more guarantees will be requested in exchange for new financing, exposing you to the possible binding of assets pledged as collateral.

The “Snowball”

The “snowball” technique is extremely effective and increases your level of satisfaction exponentially.

The concept is simple. If you take some snow and gather it in your hands, forming a small ball and then “roll” it down the mountain, little by little the ball will increase in volume and, as soon as it reaches the valley, it will become huge.

Here, you must recreate the same effect.

Make a list of all your debts, from smallest to largest in terms of principal to be repaid. If two debts have similar principal, enter the one with the higher interest rate first. After that, focus all available resources on paying the main part of the smallest debt, while for the others you pay the minimum necessary (maybe even just the interest part).

Whenever you close a debt, use additional resources to attack the main part of the next debt, and so on.

You will see that each step will increase your saving capacity and therefore also your action.

Credit card cutting

The time has come to give us a break – in the truest sense of the word.

These plastic cards are one of the main causes of people’s over-indebtedness. They are used for the most wrong reasons, for example for shopping or for buying basic items.

Above all, revolving cards are very dangerous, because you end up paying very high and ever-increasing fees and commissions.

You must cut them off immediately and cancel them. Credit cards are not an additional income!

Negotiate conditions

Absolutely everything in the bank is negotiable.

By “everything”, of course, I mean… EVERYTHING. And we’re all in the same sea, so your lender knows exactly what you’re going through. Try to come to an agreement!