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Intelligent Investing

Applying lessons of business leaders to personal finance

/ 04:04 AM April 27, 2020

During the last few weeks, my team and I had the privilege to talk to the management of listed companies to ask them how they were coping with the financial challenges brought about by the coronavirus disease (COVID-19) pandemic. While all of them said the crisis would hurt their profitability by varying degrees, the good news was none of them was planning to lay off employees. All of them expressed confidence their companies would survive the crisis. And despite the impact of the pandemic on their profits, all of them gene­rously made donations to front-liners and the less fortunate.

Although not all of us can build companies that are as successful as those listed in the Philippine Stock Exchange, we can still learn a lot from how these companies are managed and apply these lessons to our own personal finance. Applying these lessons will help us stay resilient and save us a lot of stress and anxiety in times of crisis.

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Here are some of the lessons I’ve learned from those business leaders:

– Avoid too much debts. Although the majority of listed firms have debts in their balance sheet, none of those we talked to have too much that they can no longer pay their debts due to the crisis. These companies kept their debt levels under control by staying conservative and by being selective in pursuing growth opportunities. Thus, even if their companies’ profits may weaken because of the crisis, all of them are confident they can survive, even after paying the salaries of their employees, their operating expenses and interest on debts.

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Individually, we can also be in a better position to cope with difficult times by acting conservatively and avoiding debts. This means living within our means. This also means that in the good times, we avoid the temptation to buy things that we don’t really need just because we can afford to pay the monthly amortization. By living simply, we can build our savings and avoid the stress of downgrading our lifestyle or going deeper into debt to survive a crisis.

– Invest in recurring sources of income. Property companies are among those that will be badly hit by the COVID-19 pandemic as buyers delay or cancel plans to buy properties due to economic uncertainties. However, property companies today are in a much better position to withstand any drop in property sales because they have much larger and more diversified source of recurring income coming from leasing pro­perties. This change took place as companies continuously expan­ded their rental portfolios during the good times. Although they waive rents on malls in areas that are on lockdown, they continue to collect rent on offices and hotels that are used to house employees who need to live close to their offices during the lockdown.

As individuals, we also need to invest in recurring sources of income, such as time deposits, bonds and rental properties, to help tide us over during difficult times. This is even more impor­tant for those who are dependent on volatile sources of income such as sales of financial products and services and big ticket items (stockbrokers, investment ban­kers, property agents) as demand for these products and services usually softens during crisis. By having other recurring income sources, we don’t need to cut back much on our expenses as we still have some cash flow to help fund our day to day essentials.

– Embrace innovation. Companies that have invested in technology are expected to be among the most resilient to this crisis as people now do things remotely to practice social distancing. For example, online transactions and the use of mobile wallets have gone up significantly in the past few weeks because of the lockdown.

People will most likely continue using online platforms even when the crisis is over as they realize the convenience of doing things online. As a result, companies that are dependent on traditional platforms will lose market share to innovative firms.

For individuals, this highlights the need to resist the temptation of staying complacent and doing things the old-fashioned way just because we are used to it. We should be open to innovation and learn new ways of doing things. This also requires us to be humble as we sometimes need to learn better ways of doing things from people who are younger than us like our staff or our children. By embracing innovation, we reduce the risk of being disrupted. We also stay relevant to our clients and even our emplo­yers, allowing us to protect our income.

– Be compassionate. Even though listed companies expect to hurt financially due to the crisis, a recurring theme that we got is prioritizing the welfare of employees and the communities where they operate over profita­bility. By doing so, these firms earn the trust and loyalty of their employees and the people around them. These acts of kindness will pay off by allowing these companies to operate smoothly in the future as people minimize disruptions and remain suppor­tive, remembering how they were helped during difficult times.

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As individuals, we can be compassionate in many ways, not only by giving donations to charities and front-liners. We can also volunteer or cheerfully do tasks for our employers that are not part of our job description. We can also be compassionate to our neighbors by following orders without complaining. By being compassionate, we create good will with others. Aside from hel­ping us feel good, this sometimes opens doors of opportunity in the future that can be financially rewarding. INQ

For more news about the novel coronavirus click here.
What you need to know about Coronavirus.
For more information on COVID-19, call the DOH Hotline: (02) 86517800 local 1149/1150.

The Inquirer Foundation supports our healthcare frontliners and is still accepting cash donations to be deposited at Banco de Oro (BDO) current account #007960018860 or donate through PayMaya using this link .

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