Are you curious to find my expectations of the financial impact Covid-19 will leave behind? Are you trying to figure out how to survive financially during this period? Or do you want to have a short overview on how to scale-up for the future. Then this blog is a must read for you!
What do I expect the Covid-19 virus has caused financially?
I think financially the virus will cause a next financial crisis. Various governments are putting billions of euro’s/dollars into the economy. with the hope to rescue their economy. But what I think we are pulling a dead horse. Because if you decide to lockdown your country, there are no running businesses to create revenue. Yet we are trying to safe businesses?? Which one are you saving? Is it the enormous bankruptcy files from businesses or are you trying to save the stock business or your own country? I don’t slight get this part. Obviously, we are trying to prevent bankruptcy files from various companies especially sole entrepreneurs. But is it not best to say, that we cut of the vat-taxes the Dutch people are paying and cut of the corporate taxes for this year? And people who didn’t had any business ongoing apply through the normal way. I mean this is just a suggestion. But putting so much money in the economy, will this really help or create a big state debt whereby we have a new Greece scenario. So, we are panicking, but are we really helping? Because if this crisis doesn’t end in three months’ time what is the government going to….. (scenario based on the Netherland only).
Because I think we are entering a new recession, it will mean the government is going to spend less, trying to create more revenue to pay of their depts created by the virus. Citizens are going to safe more money instead of spending money. Because of the big shock they got with this virus (this also goes for the various businesses). If this happens, people will lose their jobs, because there is less of productivity in the country. Less productivity means less work, means less money to spend for business, because less is coming in the pocket. So, is this world recession going to be solved as all the other once’s? No, is the answer unless governments, world leaders and kings and queens work together. And not only think about their selfish gains or interest. This unseen war is one of the greatest of our time. And has a chain effect, because as said no hotels, no restaurants, less wholesale purchases, less cleaning, less transport, etc.
You also have many people who have bought a 2nd or 3rd home for a B&B and Airbnb. They will no longer be able to cover the mortgage. Over-leveraged and with no income. Is this calling for another banking crisis? Because people can pay their second mortgages?
This doesn’t only go for the Netherlands. In Spain, Italy, Portugal, Turkey, Morocco etc. for which tourism generates a large share of GDP. This will cause a big loss, whereby restructuring and getting back on your feet will be like getting back on your feet from a war. The same goes for the Netherlands.
I think through this crisis, there is going to be a bigger gap between the poor and rich. Because the poor already didn’t have enough and the rich just lost a bit. The differences will create a bigger gap, which may lead to more criminality, civil wars etc.
Also do I think that countries will now restructure their country for the better. For such epidemics, this came as a big shock for many for us.
The stock market
The stock market is at its worst since the Great Depression in 1931, this will cause financial losses who already invested before the pandemic, but also financial gains for those who want to invest and believe that the market will restore itself (after government’s have push some great amounts of money in it).
If the Dutch government doesn’t make an exemption for start-ups, there will be whole lot of bankruptcy files. And you will have a lot of people going into social benefits, who doesn’t even belong there. This is because the Dutch government had made this rule that if you didn’t start your company before the 1st of January 2020, you are not applicable for any of the rescue scheme. The funniest part is, if that individual has a student loan or any other loan or debts, he will go into the social benefit system. The government will again pay for all the loans, and the care of that person. And the person will be debt free. This will cost the government an average of €70.000, – till €90.000, – depending on the height of the debts of that person. So, what did you lose, if you just gave the start-up that three months of benefit?
You might think it’s unfair that the start-up who just started will gain as well. But have you thought about the fact, that some people had new year’s resolution? Have you thought that the person owing a brand-new coffee corner shop started this year had saved for a long period before getting the coffee shop? But because of the lockdown, the owner can get any revenue.
Now, the Dutch government wants to give every business € 4000, -, who is damaged by the consequences of the partial lockdown. But are the start-ups applicable?? Or you just want us to get loans at qcredits. A business that started without a loan is now forced into one. Do we really want to go this way?? DUTCH GOVERNEMTN PLEASE THINK ABOUT THIS!!
What should we do about budgeting?
When I am budgeting in my company, I write down all the cost that needs to be paid for the whole year. So, when I received revenue, I tried to pay most of everything for the whole year and pay myself. So that I don’t get into financial trouble, by paying my bills. And if I even if I receive a little amount, I can still pay myself.
Whether you have a company, or you have a household, budgeting is the key to make ends meet. For individual households I suggest for you to have envelops and put an amount in. Make a separation for bills, savings, personal spending, groceries shopping and if applicable pocket money for the kids. This will teach you not to overspend.
What can we do in the future in times of a pandemic?
I suggest creating a buffer for uncertain times. So, every time you receive a payment, you make sure you split into 5:
- Pay all bills
- Pay taxes
- Save money
- Pay yourself
Are you interested to find out more on how to manage your money? Listen to Meverly Adjhei Benjamin’s bi-weekly podcast.