The pandemic has displaced a sizable amount of people all around the world from the upper class and middle class to borderlines of poverty. Businesses have come to a grinding halt and the financial crisis led by COVID-19 has managed to deliver a knockout punch. If the pandemic has been harsh to your personal money management routine and finances, here are a few pointers to get you back on your feet and manage your finances well during these unprecedented times.
1) Establish Your Expenses And Income
As rightly said by Benjamin Franklin, “By failing to prepare, you are preparing to fail”. Planning is an essential step in all processes. So, while trying to manage your finances, it is vital to list down all your expenses in a book or prepare an excel sheet. Write down your income corresponding to the expenses and update it regularly. Make sure that your expenses do not exceed your income.
2) Less Spending Equals More Savings
The pandemic has spared all of us from expenses related to travel, tiffin service, etc. since the lockdown. All this spending translates to savings. And while the money saved is money earned, the act has proved to be a boon for effective financial management.
3) Priortise Your Expenditure
Expenses are bound to happen. While some that are related to necessities (rent, groceries, bills, medicines, insurance premium, EMI’s, etc.) are essential, the ones that are not, should be avoided. Individuals must avoid incurring expenditure on new clothes, white goods, gifts, and lavish purchases to manage their finances well.
4) Contact Your Bank
Now would be a good time to leverage the goodwill you have gained with your local bank manager. Get clarity on the minimum balance that is required in your savings account, check if there are any outstanding dues, pending payments or unpaid EMI’s. Update yourself with all the grants and schemes that the government is providing during these times. Schemes such as the one under section 24, where the interest paid on your home loan can be claimed as deduction from your total income, up to Rs. 2 Lakhs. Keep your CIBIL score above 735 points, pay your bills, and wrap up the accounts that are not in use.
5) Use Credit Wisely
Your credit card can be a powerful tool during medical emergencies. Hold back on using your credit card to pay off other dues. If you are defaulting on your monthly payments, make sure to pay off your dues ASAP.
6) Big Purchases Can Wait
Unless you have parked the money aside to invest in a house, if you are receiving considerable grants from the government or reimbursements under special schemes, do not make large investments. Real Estate, business capital, an expensive car or an asset can be purchased once the economy shows signs of improvement. If you are planning on paying off the EMI’s of your new house with your monthly salary, hold back on the purchase because the job market is highly unstable. If you are living in a rented accommodation in a posh locality, now would be a good time for you to move out of that apartment, downgrade to a single bedroom and save up on the money.
7) Emergency Fund Is A Good Idea
If you do not already have an emergency fund, now would be a good time to start saving up for the unforeseen and difficult times. If you have a steady source of income, start keeping some money aside and only use the emergency fund, if the situation demands you to do so.
8) Do Not Pay Off Debt With Debt
Taking a loan to pay off a loan is never a good idea. Make sure to pay off your debt with your income or with the money that you have saved. Do not take a new loan unless it is essential. Borrow from your friends and family if you can and pay them as soon as your income has stabilised.
9) Invest In A Health Insurance
Investing in a health insurance that covers pre-existing diseases if any, is always beneficial. Having a health insurance has become even more important during the current times. A health insurance shields you from paying off hefty hospital bills which is why It is important to pay your premium from time to time. Consult an official representative of the insurance company, avoid third party vendors at all costs.
10) Use The Money You Have For A Lifestyle That You Can Afford
Do not submit to peer pressure. It is times like these, that are meant to give you a reality check. Luxury comes at a price and if your means are scarce, stick to the essentials and make do with the basics.
11) Re-Check Your Financial Portfolio
If the investments that you have made are not paying you any dividends, liquidate them at the earliest. Mutual Funds, FD’s, an extra car, dead investments, luxury items, unused gadgets, and anything else that can fetch you instant money, liquidate it. With cash in hand, you can always re-invest but it will be exceedingly difficult for you to liquidate these assets when you are in urgent need of funds.
These pointers will ensure strategic financial management that will get you through these uncertain times. All things considered, the need of the hour is to stay home and stay safe.