It is a challenge on the global level since the Coronavirus does not bound with national boundaries.
It is a challenge where many of the policy decisions in response to the pandemic are made, and at the local levels, where people decide on whether to comply with government guidelines and whether to support one another in times of need.
Everyone one of us bears great responsibility for the health and wellbeing of others.
Billions of people are in lockdown, unable to visit one another, unable to go to work, unable to attend school, unable to meet one another in public places. People around the world are struggling and separated from their loved ones in their hours of need.
At times of existential danger, we instinctively desire to be close to our family and friends but now we are forbidden to do so, for every act of physical contact – every expression of physical loving-kindness and compassion – could bring illness and death.
But at the same time it has given us much valuable learning which will be fruitful for our future:
Multiple Income Streams
Warren Buffett cautions that individuals should never rely on a single source of income. He recommended developing income from a variety of sources. When you have more than one source of income, you’re better able to handle emergencies.
Keep your Borrowing Minimal
Increasing our credit just because of the easy availability of loans shouldn’t be a reason to borrow.
Paying high-interest rates for borrowings that could have been avoided is one of the worst financial mistakes one can make. We must always evaluate priorities and always have a cut-off limit for our expenses. Sure, the RBI moratorium on loans has given temporary relief, but it will surely not solve the challenge.
In 2019, India was already going through its cyclic economic slowdown. The entire credit industry, including instant personal loans and NBFC lenders, we’re already witnessing challenges.
Investment in health insurance is crucial
In India, the COVID-19 tests in private labs cost around Rs. 4000, and despite the government subsidizing the same massively, it can cost up to Rs. 7,000.
On average, ICU charges per day lie somewhere around Rs. 30,000-40,000.
Without adequate health insurance, you can only imagine the hospital bill you will be left with after your complete recovery. Consider getting health insurance a priority for you and your family and make sure the coverage is satisfactory to pay the highest of bills.
Not everything has been affected by Covid-19 equally. If you had all your money invested in one asset that is the reason for concern.
Diversifying assets also helps spread risk.
For example, house prices are still forecast to fall but have held up strongly so far this year and any dip is now expected to be much smaller than initial predictions.
Differentiate between needs and wants
If you have faced cash shortfalls during this time, or have felt concerned for your future financial outlook, you may have asked yourself when making a purchasing decision, “Do I really need this? Wants are more discretionary, like expensive clothing, entertainment, or ordering take-out. Precious resources should be redirected towards what really matters to us.
Create an emergency fund or maintain liquidity
Before the pandemic saving for three months’ worth of expenses was enough but if you are the one who has followed this advice, you must have suffered the most.
This pandemic has drained out all your savings account or if you never had an emergency fund in the first place, focus on building from scratch now once you’re steady again.
Aim to save at least six months’ worth of living expenses, which sounds impossible right now, but the important thing is to start saving and tuck money away consistently.
Over time, you can achieve your goal.
Research for AIA found that while just over half of respondents said they felt financially prepared for lockdown, another 27 percent did not and 21 percent did not think about their finances at all.
Speculations are risky
Increasing numbers of people have jumped into investing in shares in recent years or have built up more exposure to share markets through their Savings.
The March market fall was a sharp reminder that those share prices don’t only go in one direction – and that anyone investing in equities should be prepared for and able to ride out the volatility.
Investment in the long term is always a wise decision, we should not try to time the market.
Take a step back to revisit your finances and layout a foolproof plan to plug the existing loopholes.
Remember, the Great Lockdown will be temporary but your financial habits will permanently stay with you.
Cover Image: Nanny Finance