What you need to know:
For the business owners, now is a good time to rework your company’s finances.
Budget your business expenditure based on what you have in your bank account right now, and from what debtors may settle.
- If you are self-employed or a wage-earner, and have some financial obligations to settle at the end of the month I suggest you approach your financiers right away.
I doubt that anyone saw this coming: Coronavirus landing in our airports from the West and getting cleared through customs, self-quarantines, schools closing indefinitely, businesses gradually becoming non-operational, employers sending their staff on compulsory unpaid leave, us working from home and testing each other’s sanity.... It is unprecedented. And frightening, to be honest.
No one alive in Kenya’s right now has experienced this before. I like that we’re referring to these as ‘uncertain times’; it’s such an apt and poetic term, no? The silver lining in all of this is that those dreadful BBI rallies have been cancelled and the news about the referendum takes a backseat.
Coronavirus has created an emergency. In an ideal world – with ideal financial planning – we should have enough money in our emergency fund to cover our basic living expenses for three to six months. But, this is not an ideal world, the times are uncertain, after all. Only a small percentage amongst us has planned their finances for three to six months of an emergency.
Last weekend, after the government announced the first corona case on Friday then the subsequent safety precautions through the weekend, Kenyans thronged supermarkets shopping to stockpile for the emergency. If you looked closely though, it was the upper and upper middle class who had the money to finance their panic. It was smack in the middle of the month, the 13th to 15th – who else would have such money to finance unbudgeted bulk shopping?
Truth is a majority of Kenyans live hand to mouth. Others are self-employed. The critical and required responses to coronavirus put such Kenyans in a precarious financial position.
China has been on lockdown for 58 days, Italy for seven days, so far. We don’t know if – or when – our government will effect such a lockdown or for how long it will last. Let us prepare financially for a 60-day lockdown i.e. two months.
Our government says it will cover all medical expenses for all Kenyans who contract Covid-19. This eases the financial burden of those who fall ill and don’t have a medical insurance cover, or are unable to pay for their treatment with cash.
If you are self-employed or a wage-earner, and have some financial obligations to settle at the end of the month – loans, mortgages – I suggest you approach your financiers right away and give them a heads up to your situation. Don’t wait for your bank account to go into negative – ask your financiers for relief.
The Italian and UK governments have given its citizens mortgage, tax and, for a handful, rental relief. Our government should consider extending such moratoriums, especially to the self-employed and those earning wages.
For the business owners, now is a good time to rework your company’s finances. Budget your business expenditure based on what you have in your bank account right now, and from what debtors may settle. (I’m leaning heavily on the word ‘may’ here.) Remember that you still have to pay your employees for this month, but make them aware that next month, there may be nothing to take home. Advise them to budget this one months’ salary to cover two months of a possible lockdown.
Lastly, consider your plan B – borrowing from a trusted family member or a friend. Avoid mobile lending apps because they don’t care for Covid-19 or that you’re self-employed or not earning your wages. They will demand prompt repayment.
For those in employment, the worry of not getting a salary—at least for now— is not in your horizon. Be grateful for that. Rework your budget so you can stretch your money for as long as there may be a lockdown.
If you are working from home, note you will need to spend on internet, food and other household essentials like electricity. If you have been asked to take leave, this is no time to Netflix & chill, learn a new skill or take an online course. Put less into expenditure and more into your savings. Take advantage of any reliefs the government may extend. Plan, for an eventuality of being let go too.
Also, think about your pals who are in business, wage earners and those being sent home on compulsory unpaid leave. Let us care for one another – let them know you can send them M-Pesa should they find themselves in a tight corner anytime over the next 60 days. You could also share some of your supplies with them.
The investment markets – both financial and non-financial – are in a slump. To safeguard your investments, I suggest you do nothing. Don’t buy in and don’t sell out. A properly diversified portfolio aligned to your risk profile and financial goals will eventually ride out the volatility of this slump.
Bett Kinyatti is a certified accountant with ACCA and a former financial auditor.