During his congressional testimony, Dr. Richard Bright warned that without proper planning the second wave of Coronavirus could lead to the darkest winter in modern history. While new Coronavirus cases have been declining in many countries, the threat of a second wave remains real. The Coronavirus outbreak has taught us that a pandemic not only threatens our health but also devastates our lives financially. With the economy slowly reopening, this summer provides valuable time to financially prepare for the second waves of the Coronavirus and protect you and your family.     

A financial crisis during a pandemic

Initially, a healthcare crisis, COVID-19 also brought financial challenges to millions around the world. Before the outbreak, Liz was a barista in New York City. Working at a coffee shop near Central Park gave her the income to cover rent and food each month. Like many young people her age, Liz has only a few hundred dollars in savings. During the Coronavirus crisis, she lost her only source of income. As the shutdown prolongs, she is borrowing heavily to just pay rent and buy groceries, falling deep into debts.

Unfortunately, Liz is not alone. Despite the government’s support, paying for living expenses becomes increasingly challenging for families around the world. If the second wave of the Coronavirus strikes, the financial challenges will burden the weakened economy and put more financial strains on families. And it is up to you to prepare for this foreseeable crisis.

How to prepare for the second wave of Coronavirus financially

We have learned that the shutdown is an effective way to contain the Coronavirus. This means that without a working vaccine, social and physical distancing will be our only weapon against a very scary enemy this winter. This strategy comes with a hefty financial cost because it leads to job and income losses. Moreover, a shutdown doesn’t end quickly. Initially, the government required 14 days of social distancing, but for most states in the US, the shutdown lasted over two months. To survive the second wave of Coronavirus financially, you must save enough to cover at least three months of expenses.

What’s your Minimum Monthly Expense (MME)

Saving enough money to cover a whole winter’s expenses is a herculean task. But our experience with quarantine has taught us that our spending also decreases during a lockdown. Your goal is to save enough to cover your MME – Household Expenses Minimum. MME represents the bare minimum you must spend each month. It only includes absolute essentials such as rent, mortgage payments, groceries, medical expenses, utilities, insurance, and so on.

Saving enough to cover your MME an achievable goal, especially if you follow the steps we will discuss below to help increase your income during the summer.

Reducing your MME

With MME, you know what the least amount of money needed to survive. However, MME is often not fixed. With some efforts, you can even compress your MME further. This is a critical step because it is easier to cut expenses than to increase income. Given the short preparation time we have for the second wave, the best way to prepare for the winter is to cut your expense to its limit.

Cutting expenses is more of an art than a science. Getting creative with cutting expenses can help you reduce your MME successfully. The first steps to lower your MME include buying groceries in bulk, using public transportation, and shopping around for cost-efficient insurances on your home and car.

Aim to Save 3X MME
After compressing your MME, now it’s time to save for your new goal – three times of MME. This can provide you with a safety net to support your family for at least three months if a second wave happens in the winter. If you are able to save more, you will have more security and can even add an entertainment budget. 3X MME should be your first goal because it is the bare minimum you need to survive, without taking into consideration of government support.

Save your tax refund

Thanks to the extension of tax deadlines, many people are getting their tax refunds later than normal. If you are one of the lucky ones to get a nice refund check from the government, you already have a head start on your savings.

Tax refunds are often unplanned income. This means this money is not earmarked for a particular use and adds to your disposable income. It’s tempting to splurge it on something nice after a long lockdown. Treating yourself is important, but make sure you save most of the refund for your 3X MME fund. Saving at least 90% of your tax refund gives you a boost to achieve your 3X MME saving goal. If you save 100% of your refund, that’s even better.

Getting a Side Hustle

Saving enough money to cover three months worth of MME is a tall task regardless of how much you cut costs. Most likely, your regular income will fall short. To close this gap, you can get a side hustle. It turns out that getting a side hustle has two crucial benefits that can help you prepare for the second wave of the Coronavirus.

First, the obvious benefit of getting a side hustle is the increased income. When your regular job fails to help you meet your savings goals, a second income can help you save more. As the economy reopens, demand for labor also grows. You will find that it’s easier to find work now than the months before. Use this opportunity to work more shifts or take up additional responsibilities.

A side hustle that doesn’t require you to get out of the house provides an additional benefit – income protection. While the main goal of a side hustle is to boost your income and savings, it doesn’t have to stop there. Remote working such as setting up an online shop requires no physical presence and is not limited by a lockdown. If the virus comes back in the winter and you lose your main income, you can still make money from your remote work to support your family. Some online shops even experienced an increase in volume during the shutdown.

Make Your Savings Work for You

Putting your money into a savings account is not the best way to store your hard-earned savings. The prevailing interest rate for a savings account is around 0.1% in the US and even lower in Europe. A regular savings account can keep your money safe, but it does nothing beyond that. On the other hand, it is a worse idea to invest this money in the stock market. This money is your safety net against the second wave of COVID-19. Keeping it safe should be a priority and added interest is just an additional benefit.

An alternative to a regular savings account is Certificates of Deposits (CDs). CDs are extremely safe saving tools. Most CDs are insured by a government agency, making it as safe as your bank deposits. Additionally, CDs have higher interest rates than regular savings accounts. The higher interest rates come at the cost of not being to withdraw your money whenever you want. Each CD has a maturity date on which you can take your money out. Before reaching maturity, the bank will charge you a small penalty for taking it out early. The early withdrawal penalty actually can be an added benefit in this case. The penalty prevents you from using the money casually and gives you more incentive to keep the money growing.

In this case, putting your money in short-term CDs can give you higher interest rates and still make the money available before the winter. You can even use a CD ladder to get higher interest rates while keeping your money accessible. When the CDs mature, you can assess the situation and decided to either reinvest the money or use it to cover your expenses.

Preparing for the worst and hoping for the best

We hope the Coronavirus never comes back again and that the worst of the suffering is already behind us. However, that is an unlikely scenario. A second wave is almost inevitable and it could potentially be even more damaging than the first wave, as the recovery from the first outbreak remains slow.

Knowing this, the responsibility to prepare for the potential outbreak falls on your shoulders. With dedication and smart planning, you can still secure stability for you and your family this winter. In addition to the tips above, budgeting and making your money work for you can help gain financial stability in the long run.