The rapid societal changes and uncertainty brought about by the COVID-19 pandemic have been a shock to everyone's systems. No one knows how to handle a situation like this, and that can lead some to act in ways that are more harmful than helpful.
The five activities listed below might seem like a good idea right now, but in the long run they could actually have disastrous consequences for your health or your financial security. Avoid them at all costs.
1. Buying too many shelter-in-place supplies
It's a good idea to have some extra groceries, toiletries, and cleaning supplies on hand, as more and more communities are encouraging people to remain at home to slow the spread of COVID-19, except for necessary trips. But purchasing too many supplies can have unintended negative consequences.
First, you might be depriving others in your community of things they desperately need. Second, if you're spending all your spare cash on food and toiletries, you may not have enough money to cover your bills, and that could lead to serious long-term financial problems. If you purchase food that will expire before you can use it, or food no one in your household wants to eat, you could just end up wasting money when the food goes bad.
Limit your grocery purchases to just what you need for the next couple of weeks, and to what you know your family will use. If you run out, you can go to the store or use a grocery delivery service. Many stores are implementing special hours in the morning for high-risk individuals, to reduce their risk of exposure, so they can shop while the stores are newly cleaned and stocked.
2. Selling off a bunch of your investments
The stock market has been extremely volatile over these last few weeks, and that has led some people to sell off their investments in the hope of avoiding huge losses. But it's important not to panic right now. You will probably lose money in the short term, but if you've invested in large, stable companies, their stocks will likely recover eventually -- so you're better off leaving your money where it is.
Avoid paying too much attention to the daily ups and downs, if you're prone to making emotional investing decisions. The stock market has gone through many tough times in the past, most recently the Great Recession of 2007-2009, but it has always recovered eventually.
3. Buying a bunch of stocks you think will do well
Some companies are doing better than ever in the midst of the COVID-19 pandemic, because their products are in great demand at the moment. But that doesn't necessarily mean that they're your best options for long-term investments.
If you sink a bunch of money into a company you expect to do well because of the pandemic and then you lose it, that money is likely gone forever. It could also jeopardize your financial security, because you won't have that money to cover your living expenses when you need it.
Flights are unusually affordable right now, as airlines have dropped their prices in response to plummeting demand. Traveling might seem like a good way to get away from it all, but it's taking an unnecessary risk, especially for those who fall into high-risk groups, like the elderly and those with underlying health conditions.
Not to mention...you can't travel to that many places right now. Travel out of the United States is restricted, as countries around the world try to contain the spread of COVID-19. Many airlines are also grounding a lot of their fleets, which means there are fewer flights to take you wherever you want to go.
5. Spending like everything's normal
This situation is not normal, and we don't know when normalcy will return again. So right now we need to focus on conserving cash to help us cover our essential expenses. This is especially important for those who have already lost their sources of income due to COVID-19, and those who are at risk of losing their incomes.
Review your current budget and look for areas to cut back spending. You may want to take measures like canceling certain subscription services you don't use often, or turning your thermostat down to lower your energy costs. Do whatever you can to conserve your cash, and place that extra money into an emergency fund that you can rely upon in the weeks and months until things begin to return to normal.
Millions of Americans face tough times over the coming months, and there isn't much that most people can do about that, until the pandemic starts to abate and people can go back to work. But avoiding the five mistakes above can help keep your situation from getting any worse.