Finances during Covid-19

The Year 2020

As we all are battling the ongoing Covid-19 pandemic crisis, it has not just put in danger millions of lives but it has also given a huge blow to the world economy, especially emerging markets and populous countries like India.

As a matter of fact, IMF has already declared it the illest recession since the 1930’s great depression. Every country is in a conflict between saving it’s people from dying and minimising the harm to its economy. That being said, just like any other fallout, the one we are facing right now is teaching us many lessons.

The mistakes that we make, teaches us lessons some day. A lot of us never planned our financials or had huge spending during normal times. But normal times are no longer valid, we have new normal. Amid the crisis, below are few valuable financial or money lessons we must learn from coronavirus and plan our financial life.

The Financial Lessons.

1. Before investing anywhere, build an Emergency Fund – “If only I’d saved more”. We all by now know nothing is certain, and financial ups and downs are part of life. It goes without saying that investing money is one of the efficient ways to inflate your money and save for the future, however not all options provide cash then in need of the hour. An emergency fund is the one you set aside to cover your unpredicted losses like loss of employment or when you become bankrupt or when you face a major accident or something that requires an ample amount of money. As a safety measure, you should always save 5- 6 months’ worth of your living expense so that you don’t need to borrow money if something of that sort happens. The current Covid-19 situation is likely to last for more months from now and if we had created an emergency fund beforehand we’d know that we’ll surely survive six more months in this lockdown.

Therefore, having an emergency fund is top in our list of financial lessons. To know how to create an Emergency Fund, please click here.

2. Loans and credits should be least and last in your bag: During normal times, we have EMIs going on, be it home loan, vehicle loan or personal loan, it’s easy to buy stuff and see repayment of loan interests monthly. However owing money is a burden that we build ourselves. It’s true that not all debt is bad, the lesson learnt is to keep it as light and low as possible so as to decrease the risk of complete financial breakdown during a crisis like this.

Next time you take a loan, the primary question you must ask yourself is, whether it’s necessary and needed or discretionary.

3. Medical insurance is a must: The Covid-19 is an infection of the respiratory tract and the treatment for it runs for weeks in addition to the multiple tests done for identifying the presence of virus. These tests alone cost around 4,000 – 5,000 in private labs and can go upto 7,000 as well. Not only this, on an average, the ICU charges per day lie around 30-40k. Without appropriate medical insurance you can only imagine the amount of hospital bills you’ll have to pay, which may run into lakhs and make the condition miserable. So having medical insurance gives you financial stress relief in such times. To know more about which medical Insurance you should buy, please click here.

4. Predominate your spendings and budgeting: It’s easy to fall into the trap of spending unnecessary money over lifestyle alongside your increasing salary or income. Except fixed costs, one can really save a sufficient amount of money by decreasing the number of discretionary expenses like restaurant bills, shopping, vacations and so many other things. You need a proportional raise to lifestyle after pay raise, not an extraordinary lifestyle. And, personal budgeting is a necessary element of good financial stability. The silver lining of this crisis is that it has taught us that we need to be smart with our money.

5. Never invest all of your money in one basket: Whenever there is a financial crisis, usually some industry goes down and some goes up. This is true in the present scenario as well, the hospitality and travel industry has suffered a great loss, the pharma industry has gushed up, the masks and the sanitiser factories are sweeping money across. This is just an example of how a crisis hits different sectors differently. So now if you invest all of your cash in one place / stock or business, probability is that it will put you at the threshold of financial crack. However if you diversify and distribute your investment into small investments made to different sectors and if one sector is in loss, another one can always back you up, that’s the beauty of diversification.

6. Second source of income: Also called passive income, diversifying your income and your investment will keep you guarded during any calamity or crisis and ensure basic flow of money. Passive Income can be from various sources, considering the power of technology and internet, it is not hard to build a passive source of Income with your hobby, talent and ideas.

It can be in the form of rent, writing blogs, putting your photography online, making youtube videos, taking online classes etc. Here we have list down 12 passive income ideas for you.

7. Have a Term Insurance: Term insurance is a form of life insurance that provides coverage for a specific period of time. If the insured dies within the specified time, the insurer pays the sum assured to the nominee. Term insurance does not have an investment component, it is purely an Insurance of life, and hence, even the premium is less. Here are the top 6 reasons that term insurance is must have and how we can help you choose the right plan.

8. Nominations in financial documents: People generally don’t put nominee details in financial documents unless it is mandatory. Nomination is important and you should ensure that you have nominated a person who will be entrusted with your funds in the case of your death. In the event of your death, it will be cumbersome for your legal heirs to take control of your investments. By having a nominee, the amount in your bank account and other investments gets transferred directly to the nominee and the process is fairly simple as the nominee only has to prove their identity.

            Every Investment form has nominee section

If you can modify your behavior with your finances, you can modify your financial future. All you need is the right financial expert to show you the right path to work on building a solid plan and committing to it.

Corona will come and go, your finances should stand solid.