How to Manage your Finances in the Wake of COVID-19?
The lives of many across the globe have been halted by the COVID 19 pandemic. There is the underlying fear and nervousness among people because the times are unprecedented and no one knows how long it is going to continue. The uncertainty is what is really freaking out people.
Given the highly critical and infectious nature of the contagion, the onus of adapting to unprecedented changes and challenges lies on us. Managing finances is essential at all times but the current crisis has stressed the need for it more precisely. It is imperative to have financial security in the best manner.
Though the impact on economic growth will continue to be negative, there are few smart tips that you can implement to address the financial obligations.
Consider the currently available resources – It is important to be prepared for the hard times which lie ahead. You’ll have to figure out what you have at the moment and what will be required ahead. Use the saved amount sensibly.
The current crisis has brought significant changes to your work and lifestyle. Figure out your essential expenditures. This will help boost your savings to a considerable amount.
Now that we all are homebound, expenses of transport, work lunches, work clothes, etc are saved. Given the restrictions of leaving home, your discretionary expenditures like entertainment, meals in restaurants, splurging in malls, outings, etc have been reduced. These are boon in disguise. You can generate significant savings here.
Distinguish between essential for work and for home – The new changes in the ways of living has added new essentials in the list. The government is continuously making efforts to reduce the financial burden on citizens. Keep an eye on the current policies and seek support that is being offered.
Make the distinction that is essential in your work front that your employer should cover and all that which is essential to you personally. Operating work licensed software, internet data and a better bandwidth is the cost to the employer whereas online streaming video subscription will be on you. Check with friends or relatives to share the costs if possible, look for free services or discount vouchers.
Get Insured – It is never too late to get your family and yourself insured if there is not any. Dig into all the untouched paperwork and indulge as much as you would for any monthly Netflix subscription.
In these times even jobs and industries are at risk themselves, therefore depending on a medical cover by your employer is not enough. Having your own health cover is a must. So, without any further delay get yourself one.
Create an emergency fund – Your emergency fund must hold up to at least 5-6 months’ worth of living expenses. You don’t know how long this situation is going to continue and when a pay cut or layoffs may be announced. So, you’ll have to preserve the funds and make prudent use of it in utilizing and investing to gain better returns.
Get into the cleaning spree – A thorough cleaning of your bank account, Demat account, investments, and insurance policies will be a good check into all things unnecessary. It is time you revise old health care policies and keep everything together with passwords and confidential details.
Clean up of all unnecessary documents will make you go light and feel a bit less stressed. Consider this time in reflecting what matters to you most, what are your goals and work precisely towards that.
Stay away from panic buying – Don’t be selfish in stocking groceries for yourself due to the fear of lockdown. Panic buying puts an additional strain on your finances. Consider others also who might be in need. We all are there in this together. Let’s be attentive to what we stock up and how we do that. Wise investments will save you hereon. Tighten your budget as new recession looms. Do not unnecessarily be in the mode of hoardings things for long.
Diversify Your Income Sources– Leverage your skills to side hustle, monetize your knowledge, and remain open in diversifying. In today’s scenario, it is risky to rely on one income source. Build your skills and focus on finding out ways to get additional income in your wallet. The new normal has put all of us on the edge to prepare for ourselves financially.
Be aware of operational scams – Consumer complaints have spiked high during these times of pandemic. Refrain from sharing your personal details or your financial information. People tend to get lured by the attractive, easy way out to get money. Giving in to these tricks will turn out to be risky for you. If you think you are being targeted, be alert, and report any suspicious activities immediately.
Continue with your long-term investments – You will have to think about long term investment decisions for which you must continue with your mutual fund SIPs. The market is already experiencing volatile phases, which means you could buy more mutual funds at discounted prices. If you continue with your SIPs it is more likely to fetch you higher returns in the longer term when the market will bounce back.
Pay EMIs, defer only in case of extreme cash crunch
If you have sufficient cash to repay your credit card or loan EMIs, you should continue with payment. Deferment of payments would add the financial burden in the futures. Because if you choose not to pay the EMI, you will have to pay an applicable monthly interest despite the moratorium allowed by the Reserve Bank of India on EMI repayments. The only benefit of availing the moratorium is that this won’t impact your credit score.
The financial situation is not guaranteed for anyone. You must plan for unforeseen circumstances by not panicking.
- Adjust your lifestyle
- Have an emergency fund
- Spend only on necessities
- Focus on long term goals while investing money
Humans have weathered all storms with patience and perseverance. Keeping our mental health in balance will eventually help us deal with the situation in a better way. This is a phase and THIS TOO SHALL PASS.