Financial planning may not be uppermost in your mind if your business is no longer functioning or you have lost your job and are struggling to make ends meet. I have not been to Bali since before the pandemic was fully acknowledged in Indonesia, but I hear plenty of distressing stories from friends and clients on the island.
In terms of cases and deaths Bali has come off relatively unscathed to date but the economic impact on both businesses and individuals has been disproportionate due to heavy reliance on the tourist industry. Bali is used to taking knocks and recovering from anything from volcanic eruptions to bombings but this time is different because the problem does not lie with Bali alone; it is a global issue and no matter how safe Bali may be, international travel has come to a near standstill.
It is not easy to plan ahead either. Early thoughts were that all problems would come to an end when a vaccine is available. But that is now coming into question, even though several potential vaccines are in the late stages of development in several countries. The reason is that experts are advising great caution as it takes time to ensure that any vaccine is completely safe. Furthermore, some polls have shown that as many as 50% of people do not wish to be vaccinated, at least in the early months. So the vaccine would be of limited value if half the population rejects it.
This all means that the coronavirus could be with us for several years. Prolonged lockdowns are no longer acceptable so there will have to be a compromise. Life has to go on while we follow the recommended precautions.
Financial plans must assume the pandemic will continue
If cash flow is a problem it may be necessary to suspend payments to long term savings and pension plans. It is normally not a wise thing to do as it will adversely affect projected benefits, but in the short term it may be necessary. It may also be necessary to dip into long term savings pots. Most have this flexibility without the need to cash in completely.
It is not a good time to commit to a new savings plan unless you are confident of an early return to normality. Cash reserves in situations like the present are critical for survival as I have frequently pointed out.
But if you have time on your hands this is an opportunity to plan for the long term and allow for different scenarios. The plan can be implemented once there is more certainty about the future.
Be on your guard for scams
While the pandemic has brought out the best in most people, especially those caring for others or assisting the less fortunate, there are those who are taking advantage of people’s vulnerability in these times.
I can only quote the UK because it has a good reporting system, but authorities there have reported a huge increase in complaints about scams during the pandemic. Some are introduced over the phone by charming voices cold-calling. The latter is prohibited in the UK but with the ease and low cost of communications untraceable calls can come from any part of the world. One of the most common scams in the UK consists of offers to ‘free up’ pension schemes that are locked in until age 55.
Other scams are conducted by SMS. We have no shortage of these in Indonesia. Typically they tell you that you have been awarded money or a free gift. Best to remember there is no such thing as a ‘free’ lunch. Even responding is risky as it confirms you have an active phone number.
The Internet is by far the most dangerous place to venture. One of the most common scams is called ‘phishing’ and unless you are alert it is easy to become a victim. It usually starts with an email purporting to come from your bank and inviting you to click on a link to take you to its website. The link does indeed take you to a website and it may look exactly like your bank’s website. But it is a fake website and if you follow any instructions such as providing your password or security details your personal information will now be in the hands of criminals. The best way to detect such scams is to look closely at the email address of the initial message and the web address. If either looks odd or differs from the one you are familiar with it is probably fake. Check with your bank if in doubt.
The same care must be taken with any unusual or unfamiliar email inviting you to click on a link.
Time to check your insurance cover
It can be scary watching the news and following all the coronavirus statistics. At the end of the day it is still a very small percentage of the population that has been affected. But it would still be wise to check whether you have adequate life insurance protection for yourself and family should you be hit badly with the virus or impacted by any other misfortune.
It would be wise to review how much cover would be required to ensure your dependants can maintain their standard of living should you be struck down. If your need for protection is limited to a few years there are plenty of short term options that do not cost an arm and a leg. Don’t wait by the way until you fall ill; life companies will not pay out if there are undeclared pre-existing conditions. Even if you were unaware of the conditions!
Review your investment strategies
The past few months have seen some remarkable market moves, particularly in the US where the stock market has been hitting record highs despite a 30% fall in March and a massive slump in the economy and record unemployment resulting from the Trump administration’s failure to manage the pandemic. The record market highs are mainly due to the success of the big technology companies that have actually benefitted from the pandemic.
Other countries have not fared so well. The UK stock market has been hit by a poor response to the pandemic coming on top of a shambolic handling of Brexit negotiations. Asia is looking more promising, led by a strong recovery in China, ironically the country from which the coronavirus originally emerged.
Gold, the ultimate safe haven, has also been hitting record highs. But before you rush to put all your savings into the metal keep in mind it pays no interest and is partly attractive now because bank deposits in USD, GBP or Euro pay no interest either!
Be aware also of the accelerating move by investors into ‘sustainable’ funds. Conscious of climate change, investors are spurning oil companies for example in favour of providers of clean energy. But ‘sustainable’ funds now reach into a whole range of areas in which companies are governed. Millennials in particular are demanding higher levels of ethics in companies.
These are all factors to bear in mind when you can focus on rebuilding for the future. Although life will return to normal in due course it is likely to be a ‘new’ normal with a greater awareness of the fragility of the planet. It would be wise to adjust our financial planning accordingly.
Colin Bloodworth, Chartered Member of the Chartered Institute for Securities and Investment (UK), has spent over 20 years in Indonesia.
He is based in Jakarta but visits Bali regularly. If you have any questions on this article or related topics you can contact at : email@example.com or +62 21 2598 5087.
You can read all past articles of Money Matters at www.BaliAdvertiser.biz
Copyright © 2019 Colin Bloodworth