With the global economy due for another slowdown, coupled with major economic disruption caused by Covid-19, we’re standing on the precipice of what looks to be a long and hard global recession. So what can we do to protect ourselves? Accountant and financial blogger Sam Harith has some advice.
1. Identify your personal income stream(s)
Think of yourself as a business owner (if you are already a business owner, this might be easier to do). Think about your personal brand and how you have, in the past, managed to leverage that personal brand to generate income for yourself and your family. Now take a look at your situation right now, at this moment, and identify what income streams you’ve managed to build for yourself up to this point.
Right. Now write down those income streams on a piece of paper and write down how much you make from each income source per annum. Now you have a better idea of where your money comes from. In most cases, you’ll only have one source of income, which is fine. Most people don’t have multiple side hustles running alongside their full-time job.
Once you’ve identified your income streams and put an income value to each stream, you need to be honest with yourself and give each income stream a risk rating. You need to rate the security of that income stream (or job, as would be the case) in this current economic climate on a scale of one to five, with one being very insecure to five being very secure.
Afterwards, you should have something that looks like this (using my income streams as of March 31, 2020 here as an example).
Awesome. Now that you can clearly see where your money is coming from, we can move on to the next step, which is…
2. Secure your income stream(s)
This is easier said than done. If you’re an essential worker, good news! You’re unlikely to get laid off or retrenched in the Covid-19 financial crisis, especially if you’re a healthcare professional. So if you fall into this category, you don’t have much to worry about, except for potentially catching Covid-19 since you’re more exposed than non-essential workers are. But I’m a doctor with a PhD in finance, not medicine, so I really can’t give you advice on that area.
But for the rest of us (accountants included! We’re not very essential, apparently), we need to start thinking about how to secure our income streams. There are a few ways of going about doing this, so let’s look at two tips for securing your income streams.
Talk to your employers
Apart from cash-flow management, I’m also a big fan of talking and communication. If you haven’t had the job security and performance talk with your employers, you should arrange for one immediately. If you have the good fortune of being employed by proactive employers who’ve already had this talk with you, then congratulations, you’re one of the lucky ones!
If you’re not as lucky, you’ll need to show initiative and talk to your bosses. Ask them for their availability, set up an appointment, and ask them some really important questions such as: how would you rate my performance on the job so far? What sort of plans are you looking at in regards to the financial crisis? What more can I do to contribute to this business and secure my position at this company?
Yes, they really are big hairy questions and you’ll be putting your employer on the spot. But these are totally acceptable questions to ask them and any decent employer should be able to give you an honest answer. If they don’t, then it might be a good idea to look for other jobs now before it’s too late. Don’t be afraid to ask them these questions because sitting around and hoping for the best is not a valid strategy in these times. Security comes to those who are proactive and show initiative.
Bump up your side hustle
If there was a time to seriously consider increasing your side hustle game, it’s now. Employment isn’t as secure as it used to be for non-essential workers and if you fall into this category you need to start thinking about what else you can do to support yourself should you suddenly find yourself out of a job.
If things aren’t looking so hot on your employment end, then it’s a good idea to start looking at bumping up your side hustle game. I can’t give any specific advice on how to bump up your side hustle, but generally speaking, think about what you’d need to do to make your side hustle your main hustle. If you lost your job tomorrow, could you make that happen? How can you increase the number of customers/contracts for your side hustle? How can you adapt your side hustle to work around any limits Covid-19 might have in your location?
3. Find out what benefits you can apply for
If your employer has applied for the wage subsidy scheme, know that you should be guaranteed at least $7,026 (gross) for the next 12 weeks of full-time employment. This applies to all employees of any New Zealand-based organisation and self-employed individuals as well.
If you find yourself being made redundant, Work and Income has a very handy guide to determine what sort of benefits you’re eligible for. Note that if you’re here on a work visa like I am, you won’t be able to apply for any of these benefits (shame, but those are the rules).
4. Manage your cash
Don’t ever underestimate the power of being able to keep track of your finances. It can be very scary starting out, but once you get into the habit of doing it you’ll start to subconsciously know how to spend your money more wisely and on things that are really important to you.
So how does someone manage their cash? The same way a business does, by using a cash budget. To this end, I advocate the use of cheap, easy-to-use accounting software like Pocketsmith to manage your household budget (it’s the same software I use and I highly recommend it). But if you are looking for a free monthly cash-flow template, good news: I’ve developed a new template for you right here, so get cracking!
Having a cash budget doesn’t mean you have to sacrifice on luxuries like chocolate, games and travel, but it does mean you have more power and control over how you spend your money. With a cash budget, you can actually direct your money into things that you need and things that you want. You want to make every dollar work for you, not the other way around.
5. Upskill yourself
This is probably closely related to advice on securing your income streams. However, upskilling is more than just making yourself marketable – it’s about making improvements to yourself as an individual.
Take a look at your income streams again and let’s add in another scale of one to five with one being low skilled and five being highly skilled. Honestly rate your skill level, taking into account any new developments in your field, such as cloud-based accounting for us accounting types or takeaway-only ghost kitchens for those in hospitality.
Don’t know what the latest developments are in your field? Then you’re definitely not a five in that field. Think about what your personal strengths and passions and what new skills do you need to develop to stay ahead of the game. Make a list of the things you need to learn, go online and find out where you can learn them from.
Now is also a good time to rewrite your CV and boost your profile on LinkedIn. You should also be engaging and networking with other people within your field. That way, even if you lose your job, you’re better positioned to find a new one when economic conditions start to become better.
Technical skills aside, being in lockdown also gives us individuals the opportunity to read up on some good life-hack books (I like to call them life-hack books because I’m a millennial and “life-hack” sounds cooler than “self-help”). Don’t discount the power that these books have. While personal mileage may vary, you’ll still learn some cool new skills that will allow you to change your perspective on life, focus on the important stuff, and most importantly, get stuff done. Some of the books that I have found to be quite pivotal in my life include The 7 Habits of Highly Effective People by Stephen Covey, The Power of Habit by Charles Duhigg, and How to Make Friends and Influence People by Dale Carnegie.
But remember, all the motivation in the world means nothing if you’re not disciplined enough to act on it.
Note: The advice contained in this article is given at a very general level. You’ll need to consider your location, financial situation and personal preferences when making use of any of the information.
Sam Harith runs a New Zealand-based accounting firm and blog where a version of this article was first published.