3 Financial lessons from this COVID-19 slowdown/lock down.

Since mid- January this year, the world has been battling a pandemic that has disrupted life as we know it and have known it for as long as we can remember. In January 2019(exactly one year before COVID-19) while reassuring the country that our debt is still manageable, our finance minister assured us that barring a natural catastrophe (which he highly doubted would occur), the economy was on whhuuuuuu (whistling sound).

Well, it was funny at the time, but it now looks like the natural catastrophe he highly doubted would occur, is upon us (3 months to the end of the financial year) and might disrupt the economy and push us into more debt as a result.

From this I have picked 3 lessons for my own personal finances going forward;

Live with margin because the future is uncertain.

During this time, people have been mainly worried about those who live hand to mouth, that is, if they don’t earn in a day, then they don’t eat. In this category, we have the boda boda riders, taxi (Matatu) drivers, road side vendors, etc. It is assumed that salary earners or the ‘corporate’ class are ‘safe’ and are not in this ‘mere ya leero’ category. I agree that most salary earners don’t fall in this category, but how many would be able to survive month-to-month without a salary? I worry that if the economy and thus employers were affected for an extended period of time, then this category would also be under serious risk. I have thus been asking myself, can I be able to take care of my essential needs if I had a disruption in my monthly income for 3 to 6 months, without borrowing? You can guess my answer but my conclusion is that I need to set up an emergency fund which is liquid and easily accessible to cater for emergencies (unforeseeable events) that arise from time to time. This fund should ideally be minimum 3 months’ worth of essentials (needs) for me and my family. Uncertainty is a constant, yet we live without margin.

SACCOs and Investment clubs are of the essence.

In Kenya, it is mandatory for all Matatu drivers to be in SACCOs. Licenses are issued out through SACCOs. I am assuming therefore, that every Matatu driver has some savings aside. In times like this, this comes in handy. We would not be so worried about our taxi drivers and boda boda riders if we had such a policy for mandatory savings for them also. I suggest it be mandatory because as humans, delayed gratification is a hard. We are more inclined to discount future needs but favor current wants. I believe if this mandatory savings policy also extended to corporates as a check on our consumerism (Ugandans are known as heavy spenders, compared to our Kenyan counterparts), then those savings could cushion us in times of emergencies but then also increase our national savings rate which is key to reducing the cost of capital in the economy.

There is a difference between wants and needs.

In times like these, life is stripped down to the essentials. We quickly see what’s essential and what’s not. At a time when transport is at a halt, bars and restaurants closed, sporting events cancelled and a curfew in place, what we are left with, is what really matters. In the face of an uncertain few months ahead, I have to use my finances sparingly today so that I can hopefully navigate safely the negative effects this crisis will have on our economy in the next coming months.

I am not advocating for hoarding or stinginess in the period during and after this COVID-19, however, I believe this season has been the cure for my occasional dissatisfaction and discontentment.

1 Timothy 6:6-8. But godliness with contentment is great gain. For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that.

This (COVID-19) too shall pass and the financial lessons learnt and disciplines developed shall make us better stewards going forward!

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