How the Coronavirus Will Impact Your Finances? – Family and FI (2024)

The Coronavirus has become a global pandemic. The virus is making its way around the world and people are panicking. Of course, our first concern is always people’s safety. However, the question still remains… “How will the Coronavirus impact your finances?”

Where did all the toilet paper go?

People everywhere are panicking, which is causing more people to panic. People are preparing for quarantine and stocking up on supplies. Recently, the main item that has disappeared from shelves is toilet paper.

Now people laugh and joke about this (even I have,) but this type of panic is what causes major financial impacts on our society. That’s why I’m going to use the toilet paper as an example.

Stages of toilet paper panic

1. Panicked people watching the news started prepping for a quarantine and/or for all stores to shut down.
2. Non-panicked people started seeing that toilet paper was running low, and didn’t want to be the ones to be screwed out of toilet paper. So they started stocking as well.
3. Toilet paper sold out and now everyone thinks they have to stock up even more. People are now desperately seeking toilet paper, even though they probably have plenty of TP already.

Don’t believe me about people desperately seeking toilet paper? Do a simple google search for “toilet paper robbery” and you will find out what extremes people are going to.

Some places are experiencing robberies for toilet paper and travelers are also putting it in their suitcases to fly back home with. These are extreme actions that I never thought I would see!

How to avoid the panic

My question is, “Would people be panic buying toilet paper if they slowed down and thought logically?”

If for some reason you ran out of toilet paper, what is the worst that would happen? Do you know that you can use wipes or cloths? There are lots of people that use reusable toilet paper every day just to save money.

Heck, a lot of countries don’t even use toilet paper. You could use a high-class bidet and use the bathroom like royalty.

There are a ton of alternatives to toilet paper. If people just slowed down to think through the panic, they could have avoided this global shortage.

To avoid panic, all people have to do is stop and think.

Now, I am NOT saying to not prepare in times like these. I actually hope that you are prepared. However, you do not need to do extreme long-term prepping. Have you ever seen a Walmart close?

Why did I mention the toilet paper shortage?

The stages of toilet paper panic apply to other areas of panic as well. Grocery stores are seeing a shortage in many other items, and I suspect that over the counter medicines will be next on the list.

This type of thinking also applies to buying and selling stocks, traveling, and more.

All of these types of panic actions will impact your finances.

How the Coronavirus will impact your finances NEGATIVELY

Panic buying

When people extreme panic buy, they have to get that money from somewhere. Usually, that means that they are doing one of three things:

• Pulling money from an emergency fund
• Pulling from another area in your budget
• Charging expenses to credit cards.

Depending on which option people are choosing, this could mean more debt. The best way to avoid this is to become educated and think through purchases, as stated above.

Loss of Income

Whether you are self-employed, a business owner, or an employee, people of all areas will likely experience loss of some amount of income due to the Coronavirus. People will be less likely to go out shopping which will decrease sales.

Some businesses are even putting their employees on a mandatory quarantine if the employees go into populated areas. If you don’t have benefits, that’s unpaid leave.

The time to prepare for this loss of income was years ago. And the best thing you could do right now is to subscribe to Family and FI, where we help people reach financial independence. This won’t be the last pandemic we see, so you want to be prepared for the next one.

Additionally, to make up for the loss of income, you may want to consider starting a side hustle with businesses that are likely to profit during these epidemics.

Some business that might see an increase in profits due to the Coronavirus are telehealth services, online education, and delivery (mail, groceries, food delivery, etc.)

Increased prices

As small and mid-sized businesses start to hurt for customers, they are likely to start raising prices to make up for the loss of sales. In fact, according to CBS News, 52% of small and midsize businesses are raising prices and cutting back on business expenses to make up for lost profits.

Loss of Retirement Savings

If you have an IRA, 401k, or are otherwise invested in the stock market, you’ve likely seen a profit loss. Unfortunately, many people have reported that they’ve lost two or more years of gains in just the last few weeks.

This is another example of the “toilet paper panic.” A lot of people are losing their minds right now because they have lost so much of their retirement savings in the stock market. Every day I come across someone asking, “should I pull out of the market to save the rest of my money?”

The answer is always going to be a NO from us. If you look at the history of the stock market, you will see that the stock market has crashed multiple times. In fact, we were long overdue for a stock market crash.

Throughout the history of the stock market, every time there was a market crash, the market recovered and reached new market highs. That is why we never recommend that someone pulls out of the stock market during a bear market.

Travel loss

Hopefully, you won’t have to deal with this one. However, a lot of people are going to have to cancel travel plans. I am hearing that wait times to speak to airlines is hours long and that people are having a hard time getting refunds.

I feel for all of y’all, but my heart really goes out to all the people out there that have a big wedding coming up soon. Just think about the people who have spent the last year or two planning a destination wedding… If that’s you, gosh I feel for you.

Anyway, if you find yourself in this position and you are having trouble getting refunded, my advice is to check with the credit card that you used to book your travel plans with. A lot of cards offer travel insurance and you may just luck out.

Less interest earned on accounts

For those who have high-yield savings accounts or money market accounts that earn interest, you will be earning less interest. This is because the Federal Reserve cut interest rates in efforts to stimulate the economy. So while this is good news in some areas, it’s bad for the people trying to earn money in these types of accounts.

Healthcare Debt

The Trump Administration is working to relieve some financial burdens like healthcare expenses that are related to the Coronavirus. I hope they come up with a clear plan soon because the healthcare costs associated with this virus could be catastrophic.

To attempt to avoid additional healthcare costs, it’s recommended that you call your doctor to ask for advice before going into the office. Many doctors are even implementing telehealth appointments where you have an appointment via your webcam.

Additional shutdown expenses

What most people aren’t talking about is the hidden ways that the coronavirus will impact your finances.

When schools shut down, parents may need to pay for alternative daycare for their kids. Additionally, some items will increases in price because of supply and demand.

There’s a lot of costs that most of us will have to pay for that, unfortunately, we probably won’t see any government breaks for.

How the Coronavirus will impact your finances POSITIVELY

Cheaper Gas

This is due to two reasons. First, of course, the Coronavirus is playing a part. Second, right now there is a type of “oil war” as some would call it between Saudi Arabia and Russia. Click here for more news-related information on that.

Both of these events are causing gas prices to decrease which is definitely a positive for consumers.

Lower mortgage rates

As mentioned above, the Feds cut interest rates. So while that is bad for savings and money market accounts, it’s very good for people who hold mortgages or wish to take out a mortgage.

One person just told me that they recently locked in on a 3% interest rate when they refinanced their mortgage. A low-interest rate can save you A LOT of money in the long term.

The Federal Reserve lowers interest rates because they want to encourage people to borrow and invest money, the goal is to help stimulate the economy.

Stock market SALE

I’ve saved the best for last. While most people are freaking out over a loss in the stock market, this is when real investors get excited.

The rule in the stock market is to “buy low, sell high.” That means that the goal is to buy stocks when they are really low, and sell them when they are high. Panic makes people do the opposite.

Uneducated investors buy stocks when the stocks are high and feel great because they have a well-performing stock. Then, when the stocks drop, they get afraid and sell them. The result is that the investor ends up losing their money.

Warren Buffet (billionaire stock investor) will tell you that he loves market crashes because that’s when stocks are on sale! According to Buffet, if you’ve been wanting to invest in the stock market or increase your portfolio, a market crash is a good time to get in.

To conclude this article about how the Coronavirus will impact your finances, I’d like to remind everyone to put your health first. We encourage everyone to take advice from the Centers for Disease Control and Prevention (CDC) to help stop the spread of Covid-19 in your community.

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