March 19th, 2020, India’s Hon. Prime Minister Mr. Narendra Modi addressed the Nation through television for the first time on the COVID-19 outbreak. The Government of India implemented Nationwide lock-down wef. 22nd of March. More than 100 days have passed, the Nation is under curfew to contain the spread of the Novel Coronavirus. A lot of people are suffering profoundly and for many, life has taken a 360-degree turn – Physically, mentally, and financially. Based on the data by the Government of China, the first case of ongoing COVID-19 disease spread can be trailed back to the 17th of November 2019, when the Novel Coronavirus was found in a 55-year-old Hubei resident. This unidentified virus unfurled at the speed of light; affecting every continent, every country, just about every corner of the World. A microorganism has shaken the mighty Human race which for decades is holding the weapons of mass destruction, nuclear arsenal, and finest armies. 400 million. That's the number of people worldwide who have lost their employment due to the ongoing COVID-19 crisis. In which more than 13 crores alone are Indian citizens. Today, India is facing the biggest economic catastrophe since its freedom. The global financial crisis in 2008-'09 was a massive shock. But our workers could still go to work, our firms were coming off years of strong growth, our financial system was quite sound, and our government finances were relatively healthy.
In such a circumstance, being told to hold your horses and wait for the things to get better can just add to massive anxiety levels. Each one of us is fighting through the black hole of the financial crisis on a personal level in some or other way. Worrying about your capital can affect your overall health and well-being. How can one budget expenses to stay financially and mentally resilient amidst these times? We have churned out some money moves you can make to protect your finances amidst the Coronavirus crisis.
1. Keeping the Track of Expenses:
Warren Buffett once quoted, "First save, and then spend". To control the expenses, begin the SWOT analysis of your financial situation:
- What is good about my existing financial circumstances?
- What is weakening my financial condition?
- Will I receive any money in the near future?
- Do I have to use up any huge amount anytime soon?
Go through the list of all your expenses and see how you can scale back. Cut down on additional expenditure and luxury items. Stick to the essentials. This pandemic has taught many of us a lesson to live a simpler life.
2. Holding an Emergency Fund:
A contingency fund of an adequate amount aids in dealing with 6 to 12 months of monthly expenses in unforeseen situations like this. Even after you resume work post-pandemic, the flow of money many not turn smooth for quite a while.
3. Expanding the Investment Portfolio:
Optimum diversification of your investment is the best way to lower the risks and raise the wealth. Putting all the eggs in the same basket, makes you lose all of them if any accident occurs. Likewise, if you go on investing only in fixed income or say, only in the real estate market; you will end up suffering the loss of what you had left with during such tough times.
4. Keeping-up with Health & Life Insurance:
As a wise one once said, the greatest wealth is health. In the middle of this virulent disease, the threats to your health are considerably higher. Pay the premiums on time and moderate your liquidity out-go. If you still do not hold health insurance of your own and are dependent on your employer; the coverage will get terminated the moment you lose your job. One can also explore the option of converting the company's group policy into an individual retail policy by paying the premium to the insurance company. Be independent, buy your insurance cover because having medical expenses is a big hole in your pocket no matter where you come from.
5. Extending the EMI Period:
A job loss and economic crossroads can lead you to a debt trap. If you are worried that you are not going to be able to pay your car, home, or any kind of loan EMI on time due to recession; call up the bank and request for the extension of the EMI period. Enhancing the tenure of the loan is to save some amount for a tragic situation. To look at the positive side, deferring payments at this point will not impact your credit score.
6. Disbursing the Credit Card Dues:
Going into debt shall be the last resort in anyone's life amid the Global recession. It is a prudent choice to clear your Credit Card dues before everything else. Credit Card debts carry interest rates that are generally 3 times higher than a personal loan. Thus, paying them off on time should be the foremost priority to minimize the burden on other expenses.
7. Researching Your Options:
In the moments of vagueness, the endeavor is the only best friend. Take up part-time work. Even a little financial support can help you to avoid major financial distress. Discover the ways to monetize your hobbies and expertise. As businesses are going virtual in this long-lasting lockdown, many people have begun to sell hand-made products online. Many have started online classes of their subject expertise and some are conducting online dance, singing, fitness sessions. It is a great chance for you to know your plus points and convert them into an income source.
8. Trading What's Not Needed:
There comes a time when one might get hard on cash and has no income source left, selling a part of the property, assets like Gold, or business is a decent idea.
9. Paying Attention to the Asset-allocation:
Asset allocation is distributing your portfolio investments across asset classes that can help you meet both short as well as long-term goals (E.g. Gold, equity, real estate). A well-crafted asset allocation reduces the overall investment risks and addresses liquidity needs. It is a cornerstone of investments during the economic downturn.
To sum up, this epidemic is teaching all of us some significant money management lessons. Learning how to keep up with your finances, is not restricted to present situations. Staying calm, assessing all your options, talking to the people to whom you owe money, and taking the precise opinion are the keys to retaining control of your finances in the face of the coronavirus pandemic. Many financial planning advisors in India can guide you through these challenging times in managing financial affairs. At Bajaj Capital Ltd. our mission is to help people reach mental peace, knowing their present and future are safe & sound. Standing strong in the financial company market for over five decades, our skilled financial advisors are perpetually at your service so that you can sail through the dark days. Nonetheless, no period is a bad period to build and improve your financial life. We as human beings shall always remember one law of survival – "This too shall pass". Together, let us fight the existing pandemic and financial predicament. Stay home, stay safe!
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