KTU professor: what the COVID-19 virus can do to our financial literacy

Rytis Krušinskas is a professor at KTU School of Economics and Business and the Chairman of the KTU Senate

The information on COVID-19 virus is premonitory, intimidating, instructive, motivating, encouraging and much more. However, how this could change or influence our daily practice of personal finance management? 

Usually, when certain economic disruption does not restrict our financial freedom, we have a lot of opinions about personal finance management. However, when trying to model, predict and guess how the virus can change the evolution of our economy, personal “financial freedom” can be renamed a “financial discipline”.

In this context, discipline does not imply the rules installed by a government or an institution, but, rather, personal rules and arrangements for oneself and for one’s family. Although such personal management might look simple, not always it is so.

Recommended priority steps could be:

1. Establishing a minimum budget for family or personal needs; evaluating only the necessary expenses and the income. Financial discipline will appear as planning and reviewing what can be excluded and what is a necessity. Estimating the income and expenses will answer the important question: whether you can afford to buy something else, to save it, or perhaps find additional financial resources.
2. Asses and prepare to use resources. Many estimates suggest that everyone should have a financial “cushion” for 3-6 months of unexpected expenses. Will that be enough? Will the crisis last that long? No one has the right answer. However, with the current situation, we should emphasise the importance of saving and its measures. If personal financial security is a priority, the financial cushion should be as soft as possible.

Given the economic challenges, the aforementioned are the key steps to budgeting.

However, COVID-19 can also teach us additional lessons:

• Self-monitoring: understanding and trying to apply financial security principles during the crisis and spending money wisely when the crisis is over.
• Helping the ecosystem: helping the businesses around us go through the crisis together, creating future based on trust, responsibility and support.
• Caring for those around you, especially the elderly, by buying and bringing the products they need.

Many simple things do not require research or insights. Often all it takes are good words, best intentions, lending a hand and concentration. Well, the exceptions just confirm the rules.