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3 Money Mistakes To Avoid During Coronavirus Lockdown

Adhil Shetty
Photo: www.freepik.com

Amid an unprecedented nationwide lockdown, taking steps to arrest the spread of the deadly Covid-19 virus is now the topmost priority. The ongoing coronavirus pandemic has already started impacting the global economy. Markets have seen extreme falls and volatile phases which have wiped out years of profit. It’s thus understandable people taking certain panic-stricken financial decisions in such a tense time. But panic is never a solution to any problem as impulsive decisions at this point can have long-term implications. We’ve listed out a few common money mistakes you’d do well to avoid during these tough times.

Not having in place an adequate emergency fund

It’s superlatively crucial to have in place an adequate emergency fund at this point. While “adequate” may mean different things for different people, it’s recommended to save at least 6 months’ worth of your expenses. You may want to increase the size of the fund to be in line with your requirements. An emergency fund will come to your rescue if you face an unexpected job loss, medical emergency or any other type of financial emergency and minimise your reliance on borrowed funds. Also, keep your funds parked in a highly liquid and accessible instrument like a savings account or a fixed deposit.

Not maintaining a strict budget

One of the ways you can secure an adequate emergency fund is by keeping a strict tab on your expenses. So, make a budget based on your requirements and prioritise your spends. You may want to delay big-ticket discretionary spends until things normalise in order to maintain high liquidity and ample savings. Give preference to expenses like rent, EMIs, essential groceries, utility bills and medicines over expenses like gadgets if they are not an emergency requirement. The lockdown situation will actually help in cutting down a number of regular expenses like daily commutes and eating out – something that will work in your favour when you’re trying to cut costs.

Discontinuing SIPs in a huff

Many mutual funds are deep in red territory these days. However, if you have invested in an SIP of a fund with a proven track record and your investments are in line with your long-term financial goals, you may not want to discontinue such investments without thinking it through. SIPs allow investors the benefit of rupee cost averaging and are designed to absorb the shocks of market volatility and fetch desired returns in the long term. Besides, a struggling market may allow you to secure more mutual fund units at a discounted price. Panic-stricken redeeming of SIP investments may lead to substantial capital loss and unfulfilled financial goals. So, consider all these pointers before making a decision and consult your financial advisor if in doubt.

Tough situations require calm nerves. So, take good care of your health, look after your family members, strictly follow the lockdown instructions and avoid panic-stricken financial decisions. Wish you all the best!

The author is CEO, BankBazaar.com, India’s leading online marketplace for loans and credit cards.