he way coronavirus disrupting our lives, there is no telling, when all this ends? – We are all trying to figure out how the world would be post coronavirus? – Some fear the recession, some imagine constant interference of government in our lives, some romanticize work from home. We just don’t know what’s gonna happen. What we know is that we should manage our finances carefully amid coronavirus otherwise we will be depleted before we realize. It is high time to preserve money and encourage savings to ensure you won’t only survive the pandemic but continue to contribute to your long-term financial plans without any disruption.
Here we’ve enlisted some practical steps to better manage your finances in such uncertain times which could be useful after the end of this pandemic:
Keep Emergency Reserves
The very first thing you should do is don’t lose sight of the cash. Always keep money handy. For that, you do not have to stash money at home instead you can keep your money in the bank accounts. Spend only when needed and reduce discretionary expenses. It may be a little difficult at the start but you’ll get used to it.
In such times, you cannot deny the possibility of losing the job or underpaid. After all, production and services halted, jobs are next in line. Henceforth, build an emergency reserve for any unfortunate demise and prepare for a period of possible unemployment.
If necessary, liquidate your assets or investments in an orderly manner, to cover the short-term need of cash. While you are at it, don’t forget to check for penality and exit loads.
Manage your Debt
Avoid debt as much as possible. Do not borrow, even from friends and relatives. Do not use the credit card you have in your pocket. Whenever possible, pay in full or use the debit card until the crisis is over. With the rates going down, it might be a good time to get a better of your debt.
Hold on to your Insurances
In such a critical time, having health and life insurance is an absolute necessity. Continued coverage is very critical to you and your family especially when we are going through a pandemic situation. Having no health insurance could lead to expensive hospital bills that would be difficult to afford in these days. Similar to this, life insurance can help in providing to your family in an unfortunate demise.
If you are dependent on your employer-provided insurance then it won’t be good enough. It will provide coverage as long as you have the job. Besides, single insurance won’t be enough to give coverage to the whole family. You would be required to have an insurance that can provide adequate covers most of your health risks.
It would be a good idea to have term insurance at such time to provide to your spouse, family, and children in case of any unfortunate demise.
Manage your Investments
At such a crucial time, the two broad concerns are: managing our existing investments and making fresh investments.
First thing you should do in this direction is to avoid panic decisions. Panic-driven decisions could lead to significant losses. Clear your mind from the crowd and snake-oil sellers who are creating the false picture of buying today is a now or never opportunity. First review your existing investments and portfolio to check through the overall profits and losses amongst different asset classes. Maybe your portfolio needs some rebalancing due to the recent volatility in the market. Make sure your portfolio is restored to its initial asset allocation and aligned with your original financial goals.
In doing so, you may end up buying or selling some securities to restore the portfolio its initial asset allocation. Do not rush into decisions and do proper research before taking any step. Only allow if necessary.
It is said that the right time to check the risk-tolerance is when the things are against you. Only then you can understand how much confortable with the losses. So, reassess your risk tolerance, financial goals, and investment horizon to ensure you are on the right path. Decide whether to SIP or lumpsum to carry out your investments. Are you comfortable in investing in one shot or would choose the SIP medium to make periodic investments?
Given the situation, the SIP would be a wise choice as it will allow you to invest a small amount every month, which will benefit you with rupee-cost averaging. Or pause any new investments until your income don’t get stable or the crisis starts to settle down.
Whatever decision you make, you must analyze the situation you’re in. There is no telling when the things will start to settle down. It could be months or years. So prepare for the worse. We believe if you follow these things we mentioned above you’ll be able to better manage your finances to an extent.