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How to Be Financially Resilient while Taking Advantage of the Market Downturn amid the COVID-19 Pandemic

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How to Be Financially Resilient while Taking Advantage of the Market Downturn amid the COVID-19 Pandemic

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We’ve see more uncertainty and fear around the world these past few years than I had ever experienced before. Today we will talk about how to be financially resilient while taking advantage of market downturns amid uncertainty, whether it be volatile circumstances like we saw during the COVID-19 pandemic, or during a long-term bear market cycle. You never know if a bear market could turn into a recession, so we’ll discuss strategies to keep you financially secure, while taking advantage of a market downturn.

In my teens I learned the Serenity Prayer. Its important for me to remember these words during times where I feel less in-control. 

how to be financially resilient and take advantage of the market downturn amid covid-19

“God grant me the serenity to accept the things I cannot change;

Courage to change the things I can;

and the wisdom to know the difference”

The point is to realize that during uncertainty, there’s a lot that you don’t have control over. It might increase your anxiety, and make you uncomfortable, but recognizing and accepting that you don’t have control is the first step. Then, note what you do have control of. 

DISCLAIMER: The intent of this article is to help you be resilient and prosper through tough times. It is not meant to be insensitive to those who are struggling. I am not a financial professional and I do not offer financial advice. Here, I share my personal point of view and aim to educate based on my own personal research. My heart is heavy and I want to help.

stay positive have hope you are not alone

Be Prepared, Not Scared

It’s really important to stay calm, and focus on the things which you do have control over during uncertain times. You can:

  • wash your hands;
  • physically distance yourself from others; 
  • ensure you get a good amount of sleep, nutrition, exercise, and water;
  • limit your exposure to social media;
  • dedicate some time to meditation, slowing down, and creativity; and
  • discuss alternative work solutions with your manager/boss.

Remember, keep your distance and practice good hygiene like hand washing and covering your mouth when coughing or sneezing. We have been told that the above options are some of the best ways to avoid getting sick or spreading COVID-19.

While we have been told essential services will remain open, you can also focus on preparation in case you can’t leave your home, either for a lock-down, or if you aren’t feeling well. You might consider:

  • prepping and freezing your favourite recipes and baked goods; 
  • auditing your fresh produce and freeze items before they spoil; 
  • freezing your regular staples like cream, lemon juice, lime juice, and fresh herbs by putting them in ice cube trays so you have fresh options on hand;
  • getting outside for some fresh air. Social distancing is possible and you can get some recreation or exercise in too;
  • lighting a candle, make some tea, and focus on doing things that you know make you feel calm and cozy;
woman working creating writing
  •  signing up for Headspace app and go through their free basis meditation series which I LOVE
  • purchasing gift cards for future use to support local businesses; and 
  • taking advantage of any extra free time to consider creative pursuits, projects you have been putting off, or anything else that is important to you.

If you’re struggling these days due to the scare and uncertainty, check out a few complimentary articles to help you thrive:

 

How to Be Financially Resilient while Taking Advantage of the Market Downturn amid the COVID-19 Pandemic

Investing During the Market Downturn? Stay the Course

The first message here, following “stay calm” is to not sell your investments. You may be watching the market go down, but the loss is not realized until you sell. Basically, don’t touch your investments until you consider the rest of this article. If you are investing for the long term, your investments should stay right where they are.

Focus on your Cash Emergency Fund to be Financially Resilient

Naturally, the first thing you need to do is focus on your cash emergency fund. It’s time to assess how much you have and how much you need or want in cash to feel secure. There are many benchmarks for how much money you should have in your emergency fund, but you need to decide what is right for your household. Maybe you want 3 months cash just in case.

 

cash buffer

 We have different savings buckets, so in an event of a real emergency beyond what our emergency fund could support, we could pull from our vacation, Christmas, or car maintenance savings buckets. That’s good enough for us, but we also don’t have any kids, pets, or a mortgage payment that needs to be made. Also, while my husband’s job is less certain, I am confident that I will continue to be able to work.

Build up your Emergency Fund

The best time to build up your emergency fund was during the bull market when things were going swimmingly, but you can still be wise about building up your emergency buffer now. Re-assess your fixed costs and variable costs. Is there any way to reduce expenses or payments to allow you to build your cash buffer? At this time we are adding to our regular contributions for our emergency fund savings, just in case. Building up your emergency fund is the single best way to prepare you for how to be financially resilient while taking advantage of the market downturn amid the COVID-19 pandemic.

They say "Buy Low, Sell High": Should I Invest to Take Advantage of the Market Downturn?

Max out TFSA Annual Contribution

With the downturn in the market, investments are on sale and it is SUPER tempting to throw all your cash in for a big payday down the road. 

We need to take this slow and I advise to continue dollar cost averaging in low-cost index funds. You should only invest extra money if you are satisfied with the emergency fund you have in place. 

It is paramount that you are considering your financial security before investing extra funds. 

But what about the opportunity with investments being on sale? Should I borrow money at a low interest rate to invest? No. There was a time when you developed your investment strategy. You would have considered diversification, risk tolerance, and what to do in the event of a market downturn. You developed it when you were feeling level-headed and not emotional; stick to your plan!

For some, it may be tempting to put all of your extra cash in the market since we all know how buying low can lead to big returns, but you shouldn’t bend over backwards to get yourself into the market. 

Dollar cost averaging (spreading out your contributions rather than putting everything in at once) is less risky because we don’t know what the “bottom” is for this downturn, or how long it might last. During the last recession people were losing houses and jobs, but they weren’t fearing for their lives. This could be much bigger than we anticipate. We could be here a long time. If you are satisfied with your emergency fund, I encourage you to put a little extra toward your investments along with your regular contributions.

Take Some Time to Reflect before Taking Action

We are in very uncertain times and it is important to think rationally before deploying liquid resources. You need to reflect on what is uncertain in your own life: may you have upcoming medical bills, need to take time off work, be forced to take time without pay? 

cash buffer

Make sure you have enough cash stashed away to cover unforeseen events before considering investing the rest. 

Increasing your Income to be Financially Resilient

The economy has recently taken a hit and transitioned us into a bear market, but this is where innovation is required. Another way to stay resilient during the market downturn is by diversifying your income.

Some concerns and issues that people are facing are very apparent. Is there any way you can add value for people in a way that provides you with additional income? If you are at home with your kids, and everyone has already self-quarantined for two weeks, can you babysit the neighbours kids too? Can you offer fresh baked goods or hot meals made to order with doorstep delivery? These are just a couple ideas to get your juices flowing if money is tight in the-short term.

diversity income

What about longer term options? Maybe this has hit you hard with a wake-up call where you feel the need to diversify your income and never rely on a single income source again. Diversifying your income creates less risk, and there are many opportunities that can provide long-term passive income if you put in the work up front. For example, creating something that people can purchase electronically: a book, music, art prints, recipe book, invitations, course, program, and other forms of digital media.  If you are an artist, can you create some original work in your downtime to sell prints on Etsy passively going forward? What about taking pictures to put online as stock photos? There are so many options, you just have to envision what season of life you are in and what would work best for you.

What We're Doing: A Case Study

Before this all started, we were regularly putting about $1,350 per month (our extra money after bills) toward our student loans due to their high interest rate (at the time 6.45-6.95%). However, due to it being reduced recently (to 3.45%!), we are choosing to lower our monthly loan payment to about $400 per month until things become more certain. 

Half of the difference (~$475) will be added to our usual $260 monthly savings for our emergency fund, totaling about $735 per month. The other half will be directed to purchasing our favourite asset-allocation fund (VGRO) through our Tax-Free Savings Account using Questrade. I absolutely want to get in on the deals that the market downturn is offering,  but I don’t want to be out of cash either. For us, this is an appropriate way on how to be financially resilient and and take advantage of the market downturn amid the COVID-19 pandemic.

I am fortunate enough to have reliable work with my municipality, so no down-time really. However, I am still itching to get creative and get outside more. I want to play more disc golf, go on hikes, and mountain biking. Further, I’ve had this urge to try to make homemade bread for the first time. I think we’ll start with homemade pizza dough!

Choose to See the Beauty in Each Day

There’s a lot of uncertainty these days amid the COVID-19 pandemic. I urge you to wake up each day with hope, generosity and positivity. We need to bring the light to those who are struggling. 

Many of you are working from home, some still have to go to work, and many have been laid off. Don’t forget your privilege and how lucky you are to be here today. 

I hope you enjoyed this article and feel prepared on how to be financially resilient while taking advantage of the market downturn amid the COVID-19 pandemic. Please share your stories and resources in the comments below. Wishing everyone happiness and good health, as we are weathering this storm together.

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8 thoughts on “How to Be Financially Resilient while Taking Advantage of the Market Downturn amid the COVID-19 Pandemic”

  1. This is such good advice! We have to take care of our financial health as much as our mental health during this time. Thanks for sharing what you personally are doing!

    Reply
  2. In this time, we do just need to remember that we can’t control everything and to focus on what we can control. Thank you for the tips.

    Reply
  3. Awesome post packed with wise nuggets of info. I’m still dollar cost averaging and wish I had more in my emergency fund, but it take it as lesson learned.
    Very tempting to cash out and rebalance some investments in my portfolio and move some cash to stocks. But that’s under review. Enjoyed your post and it’s super informative.

    Reply
  4. Selling off investments is very tempting during a downturn but it’s the absolute worst thing you can do! Stay the course and stop looking at the market!

    Reply
  5. These are awesome tips! I like how you emphasize the need to think about your own current situation before taking action.

    Reply
  6. Great tips! My husband and I definitely considered a lot that you have mentioned here, particularly investing more because of the downturn. We have been blessed to set up a good emergency fund, so that is more of an option for us, but we still were very conservative. This is important to us and our financial peace during this time!

    Reply

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