A survey by XP/Ipespe, published in early April, indicated that half of those interviewed had suffered financial impacts with the spread of the coronavirus epidemic in Brazil. And 82% believed they would be economically affected in the future.
In a time of so much uncertainty, instability and anxiety, we called Eduardo Amuri for a chat, who is a financial consultant, a long-time colleague at 360meridianos and who we always turn to when we need to talk about money.
In the conversation, we discussed a little more about financial planning for self-employed people and small business owners in this time of crisis, but many of the tips are also useful for those who work under the CLT regime. We talk about the travel scenario, the rise in the euro and dollar, investments and loans.
Dollar and Euro: does this rise have an end?
According to Eduardo Amuri, it is not possible to predict when the rise in the euro and the dollar will stop: “Anyone who says they know where the currency is going, in my opinion, is either being very naive or being a cheat. Because in fact we have no prediction. Now, in this super unstable political moment that we are living in, there is even less foresight.”
Furthermore, he points out a detail that has been less discussed: “It is not clear to people that the dollar is not at an all-time high. Those who think that it cannot go up any further, that it is possible to wait to buy, have a very naive attitude. If we normalize for inflation, the dollar was already much more expensive than the R$5.60 it is today. In nominal values, perhaps not. But if it normalizes due to inflation, the dollar has already reached R$7 easily.”
In practice, this means that the currency can still go up a lot – or it can go down. “This speculation is bad,” he says. Therefore, the financial advisor’s tip for those who need to work with the dollar or euro in the near future is not to try to guess, but to make frequent and fractional purchases.
Read too: How to transfer money abroad
He suggests a scenario of someone planning to go to France for a wedding in June next year. Counting from April, this person would have more or less 13 months to plan: “The best thing is to set a date to buy euros every month, instead of trying to guess whether the currency will go up or down. The best way, in this sense, is to try to set an average price.”
Travel and refunds
I ask him what he thinks about buying trips at low prices for 2021. He talks about the risks: “It’s completely speculative.” He explains that there is, indeed, a positive side, which is helping to sustain the tourism market in this difficult time.
At the same time, as we have already pointed out in this text, it is necessary to remember that the way Brazil is dealing with the pandemic may cause other countries to impose measures against the entry of Brazilians for some time. “I think it’s hasty and I think it’s good to take a break from this agony that we have to buy a ticket, to want to travel.”
Travel within Brazil has more chances, in a less distant future
In relation to those who already had a trip purchased, do not think about rescheduling and do not know whether to ask for a refund (which will only come in 12 months) or a voucher, Amuri explains: “Unless I had a very clear perspective on the trip and this company that I have a ticket with contemplates this destination, it seems more prudent to ask for this refund, which comes in 12 months, and then deal with this money in the way I see fit, rather than being held hostage by a single company. I think that’s a bad deal.”
Tip from 360meridians: Please note that refunds have only been made available for flights canceled by the airline itself. In other words, you need to be patient enough to wait for your flight to be canceled and only then ask for a refund – an option that is also usually only available over the phone.
“A year is a short time, it’s only 12 months. You ask the person: would you use this money now? And she: no. Considering that we can live for 80 years, it is very little. This short term of our generation is too much”, comments Amuri.
Estimates for the future in crisis
“When we work with financial planning, we play with temporal spaces. So, sometimes we take a week and try to plan that money for that period. And you will play with it – for a month, for three months, for a year, for 10 years.
Exercises to reduce and increase time span are very good, because they give us a new perspective. Will a very bad month, in which I had to draw from my emergency fund or go into overdraft, make me upset? Go. But in the space of an entire financial life, this is a very small thing. So, if I put together a well-designed financial plan and slip in one month, it’s just a one-month slip. In 40 years of productive financial life, this is very little.”
Know more: Money without Fear: financial planning to travel more
He recommends very short-term and very long-term planning. Remember that long-term planning involves more variables and estimates: “The fact that we do not have the predictability to clearly organize 15 years does not make a 15-year plan uninteresting. It’s a way to start dreaming about whether the variables will be met.”
Amuri also points out that the ability to make good estimates is something that we don’t learn at school and that is sorely missed in adult life, but that it is important to be interested in learning later, especially for people who are self-employed or small business owners.
“How will a psychologist, a dentist or a blogger work from now on if they don’t make estimates? If we are planning a travel blog, for example, these inflows of money (which have been stopped), at some point will happen again. I don’t know when it will come back, so I need to estimate. For example, I will take an average of the last 6 months of billing and I will assume that, every 2 months, I will be able to fill 10% of this average. This way I design my cash flow and make my estimates. Otherwise, I’m always in the dark and can’t start any business.”
According to Amuri, this tip also applies to those who are hired by the CLT or work independently.
“I know the travel scenario is super uncertain. But I think it’s unlikely to say that we won’t travel again. The travel market will return at some point. Now, at what pace will he return? What estimate will I make? We can use the variables we have, design scenarios and make good plans going forward.”
For those interested in learning more about finance, Amuri’s two courses: “Money without Fear” and Finance for the Self-Employed”, are only open for registration until tomorrow, April 30th. Furthermore, the book Finances for the Self-Employed can be downloaded for free on Amazon.
Financial planning for small businesses and freelancers
“It is very difficult to do financial planning in times of crisis, because much of what should have been done needs to be done before the crisis arrives. We joke that the time to buy an umbrella is when it’s sunny. In a crisis, it is difficult to take measures that will drastically change the scenario you are experiencing.” Still, there are things that can be done.
For Amuri, the worst posture to adopt at a time like the one we are experiencing is passive. “Like when we wait to see what’s going to happen and try to react in the best way possible. In times of crisis, this attitude is very bad. So, if we can take the steps we would take if scenario X, Y or Z happened before this scenario happens, that’s usually a good thing.”
He gives the example of someone who rents space in a coworking space and thinks: ‘when I run out of money, one thing I would do is not rent this desk anymore, because I will be on a very tight budget’. According to the consultant, it makes more sense to take these measures before the money runs out, to have greater room for maneuver.
“What would you do if you actually ran out of cash? What would you change in your business model, what would you change in your cost panel? And sometimes we can anticipate this cut, so that it is more comfortable.”
What each one can do, obviously, depends on the realities of each person or company. From asking for a discount on rent to creating products to offer your customers, he gives some financial tips to help those who don’t know exactly what to do in this text.
Anyone who has an emergency fund can re-plan and make withdrawals in a less numerous and more planned way. Instead of withdrawing little by little, according to need, it is better to “estimate how much you need for a month, and withdraw that realistic amount once. Access less often and more consciously.”
Loans
“It only makes sense to take out a loan if we have already done financial planning and know how this loan will be used. Taking a sum from the bank to provide some relief on your bills, without knowing exactly how this relief will work, is usually a bad deal.”
He gives the example of a self-employed person who usually earns R$5,000 per month, with a cost of R$2,000. In other words, a salary of R$3,000. Taking out a loan of R$10,000 just to keep pushing this ball for a few more months is a bad idea.
“Take R$10,000 and say: this money guarantees that I won’t have to make a withdrawal from my company in the next three months. I will pay off the debt with interest rate X for the next 24 months. It’s one thing to have a plan and use that loan to make that plan viable, it’s another to just take it out and let it go. This venting is generally a bad idea.”
Investments
Speaking about investments in the financial market, Amuri explains that a crisis does not change an investor’s profile. “This thing of: ‘ah, now it makes sense to buy, because everything is cheap’. We don’t have the ability to say whether everything is cheap now. What we can do is maintain the same plan, the same framework that we had before. The fact that the market is crazy right now shouldn’t change your strategy.”
He gives the example of a person who every month buys a little bit of a stock fund to make up the variable income layer of their portfolio. “These shares that he bought in this layer when it was low will yield much more because it was very cheap. Follow your strategy to buy cheap, don’t buy because of a speculative scenario. When we make frequent purchases, we spread the risk. We don’t have to guess and we’re in the middle ground. And in the long run it makes perfect sense.”
Anxiety about the future
To end the conversation, I asked Eduardo Amuri what he thinks about the anxiety we are all feeling at this time of so much social, economic and political uncertainty.
“I see people wanting to be incredibly productive and being bombarded by advertising and marketing that try to seduce them in a moment of fragility. What I’m doing here is reducing our exposure to these advertisements a little and understanding that just because we’re at home with free time doesn’t mean we have our heads on straight.
This is going to be a period when we need an extra dose of self-care, and it’s going to be a kind of strange period, it’s a pandemic. I think it’s normal to be more anxious.”
