The Crisis No One Was Prepared For

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India got complacent. We thought we have dealt with the pandemic and it’s time to move on. We let our guards down unaware that a storm was coming. There were early indications like in 2020 but no one bothered. We crumpled. No beds, no oxygen, no medicines. If you want to understand how India missed preparing for the second wave, this thread will clarify a lot of doubts.

While no one was prepared for the lack of beds or oxygen, there was second-order effect of this that no one thought about. The lack of funds to pay for the treatment, the exploitation by black marketeers and hospitals and, the unpreparedness of families to handle the deaths of breadwinners. Medicines were being sold for as much as 30x of their retail price and hospitals demanded a flat price for each day of ICU. Cashless insurance is being declined by the hospitals and insurers are not settling the bills in full. Dependents have been left unaware of the assets left behind by those who passed away in the pandemic.

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Emergency Funds Gone For A Toss

All of this brings a question for everyone to consider. How much preparation should one do for emergencies?

All thumb rules of setting up an emergency fund have gone for a toss in the pandemic. While your cash flows may have been significantly impacted owing to a job loss, salary cuts, or lock-downs, you may also have ended up with another impact in the form of hospital bills. In some cases, entire families ended up in the hospital in the second wave.

You were fooled when they told you that an emergency corpus worth six months of expenses would be enough. No formula worked. No thumb rules worked.

It is better to be a pessimist in the short run. Be prepared for the worst. Hold so much cash that no crisis can impact you. Easier said than done for most. But always remember that no investment can provide you the security cash provides in times of crisis.

Split your emergency funds. Keep some at home, some in bank accounts, and the rest could be in liquid funds or bank deposits.

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Preparing For An Untimely Death

No one hopes to die early. Death is something that you should be prepared for irrespective of your age. When you have dependents, one must set things in order on a war footing. By preparation, I mean setting the following in order for your family –

a. Set up a folder of all your financial dealings. Make sure you log all details of your investments and liabilities. Make it as granular as possible. List down all your bank accounts, mutual fund investments, brokerage accounts, term deposits, and any other investments.

b. Add the contact details of everyone you deal with financially. Your financial planner, your fund manager, and your banker.

c. Add the login details of all the online portals you use to access your investments.

d. Nomination details of all the investments.

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e. Print-outs of your insurance. Before that, make sure that you have bought adequate insurance. If not, do it immediately.

f. Include the details of all your loans and outstanding amounts.

g. Details of your emergency funds and health insurance are other important things you should not ignore.

Make it as detailed as possible. Consider the literacy of your dependents to decide how detailed such documentation must be. Once everything is in order, run your family members aware about the details you have recorded and let them know about the location of the folder.

I hope we get through this soon and never see another crisis in our lifetimes.

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