The Covid-19 crisis has caused global turbulence. A condition that initially started as a health crisis has evolved into a far-reaching economic crisis. Stock markets across the globe are witnessing wild swings and volatility every day. The coronavirus crisis has impacted all aspects of our lives, including our jobs and finances. Considering the unprecedented situation, the Indian government has announced a 21-day lockdown in the country. With over 1000 cases in India and the unpredictability of the situation, a long battle lies ahead which needs to be fought at multiple levels. You may be having numerous questions about your finances. What will happen to your investments? With markets falling, should you stay put with your mutual funds? Should you step up on your liquid saving or spend on necessary items to meet the lockdown needs?
As you battle ongoing challenges, here are a few tips for your personal finance:
Stick To Your Budget
Budgeting will help you segregate your essential and non-essential purchases. It will help you prudently use part of your income on necessities and bank the rest. The ongoing crisis may have made you spend more on household items than necessary. In this difficult and uncertain situation, sticking to a budget may not always be possible. You can try reworking your budget by cutting down avoidable spends. Since there is no timeframe for the end of this crisis, try to improve your savings and focus only on your necessities. The government is taking steps to ensure the deliver essential items to all. While you’re stuck at home, do consider finding ways to cut down non-essential spends such as subscription costs.
Do Not Panic
Panic results in bad decisions. Your mantra for any adverse situation should be to stay calm and make informed decisions. Before taking any hasty decision, ask yourself what the impact of your move will be in the long run. Consider applying this check to all aspects of your financial life, be it household budgeting or investment. For instance, do not go overboard on stocking up household supplies or liquidate your mutual funds because there’s short-term discomfort. Think of what’s best for you in the long run and act accordingly.
Step Up Your Emergency Fund
A good personal finance habit calls for having an emergency fund. We should maintain some cash in hand to support our primary expenses for 3-6 months. An emergency fund will come handy during contingencies like job loss, medical emergency, salary delay etc. You must maintain this fund in a bank fixed deposit. With economic stress and income uncertainty, it would be wise to step up your emergency fund. Take into account your current primary expenses like EMIs, children’s education, groceries, rent, cost of utilities etc. This will also help reduce your dependence on debt during an emergency.
Go Digital With Payments
In this phase of disruption, you can stay on top of your finances by paying your EMIs, SIPs, insurance premiums, rent and other payments digitally. If you have been paying your loan EMIs through cheques, switch to ECS. Get in touch with your lender, create the ACH or bill payment mandate with your bank’s help, and get going. This will be the way to go even in the post-Covid-19 world. Going online will save you from the hassle of venturing out during this outbreak and automating it will save you from default and delayed payments. Amid the Covid-19 crisis, the Reserve Bank of India has requested banks to boost digital transactions. In case of any issue, get in touch with your bank for timely assistance.
Assess Your Health Cover
A health insurance policy is the best financial instrument you can procure to mitigate future medical risks arising due to situations like pandemics. The Insurance Regulatory and Development Authority of India (IRDAI), and the government have been taking measures to provide protection to people affected by Covid-19. IRDAI has directed insurance companies to cover Covid-19 cases and also expedite the health insurance claims made for Covid-19. The treatment for Covid-19 may require a long stay at the hospital. The insurance regulator, therefore, has asked insurance companies to cover the disease under products that include hospitalisation cost in their coverage. Depending on your insurer, your health insurance coverage may include pre- and post-hospitalisation expenses, hospitalisation tests, ambulance costs, etc. It is also important to note here that Covid-19 has been declared a pandemic by the World Health Organisation (WHO). If the government also ratifies it as a pandemic, some health insurance products may not cover its treatment. So, it would be wise to have a health insurance plan to deal with this crisis and assure mental peace for yourself.
In summary, stay calm, save a lot, go digital, do not make panicky decisions, and live frugally.
The author is CEO, BankBazaar.com, India’s leading online marketplace for loans and credit cards.