All days are not same. Save for a rainy day. When you don't work, savings will work for you - M.K. Soni
An apt quote for the present time. Covid -19 has wreaked havoc across the globe and is proving deadly to human lives. The global economy is also not left unaffected by it.
Uncertainty of the situation is creating restlessness amongst the mass. Stock markets are tumbling, industries and factories are closing, the migrant labour force are returning back to their own villages and towns, causing businesses to be shut down. During these unprecedented times, many families are also gripped with a sense of insecurity for the coming days. Even though the picture is grim, we all are hoping that the economic impact from COVID-19 will be minimal and short lived; however, being prepared for the worst will always help us.
Here are a few tips that will help you better your money management practices:
Take a stock of your assets and liabilities
Instead of worrying about the future and trying to find out whether your savings will last for the next six months in case you lose your income it’s always better to fix yourselves few short-term goals. To begin with, find out what savings are there with you in the form of liquid money (cash in banks), shares, stocks etc. which you have squirreled out. It’s also time to find out what is your spending. Make a log of your monthly budget, fees spent on recreations, clubs, bills, monthly EMIs and credit card debt. Taking stock of your finances will help you in better planning of your spending and saving the deposit. Putting everything in writing helps you to track expenses and gives a fair idea of your personal balance sheet.
Lower monthly expenses and live economically
Avoid panic buying and stocking up on groceries and other items which will only create an imbalance in your monthly budget. Curb those non-essential expenses which you can easily avoid. That visit to the salon for nails and hairs which can be postponed for a month or two, the cholesterol loaded fast food, etc. Removing those television channels from your DTH which you rarely watch, avoiding the hefty fee spent in gyms and health clubs and instead switching to traditional workouts or putting into use those Zumba steps and moves at home which you have learnt , saying goodbye to unhealthy habits like smoking, drinking etc. Although these may sound minimal, all of these will matter a lot when you have to pay the next month’s rent if you are hit by economic downturn.
Plan for long term
Although markets are crashing, and economy is going downhill avoid panicking and selling off the stocks you are holding to save yourselves from future loss. Don’t worry, you are not the only one who is nervous about the drop in share market. Think about long term and keep yourself focussed. There are several instances during the past financial crises, when huge bounces immediately followed the huge downward slopes. Don’t forget the wave-like movement and cyclical fluctuations of the business cycle. Wait and watch or else you might miss out on any bounce back that comes after.
Clear off the manageable and small debts and pay ahead
Pay off the small debts like medical bills, utility bills and most certainly your credit card dues and over dues, when you are still have your cash flow. We all know the type of interest charged over that small credit card dues after the bill cycle due date. It’s also prudent to pay ahead, the bigger ones like your EMI for home loan, car loan when the income is still rolling.
Consider the pros and cons before opting for Moratorium on your loans and limits
During this pandemic there are many Banks and financial institutions which are offering moratorium on loans and limits.Availing this opportunity will not affect the credit ratings of an individual as maintained by credit rating agencies. However, bear in mind, moratorium is not a waiver of your EMIs but only deferment of the EMIs. The EMIs will be added to the loan account and the interest will be calculated on a higher amount every month. So, it might be better to continue paying off the credit card, EMI and loan instalments, if you are not financially strained due to the ongoing Covid-19 lockdown. Opting for a moratorium probably would be best as the last option for those who are facing deep financial crunch.
Donate for a noble cause
It might sound a bit absurd, but donate with whatever amount you can into some of the funds created by the Government or any other authentic entities which are exempted from tax. Donating will bring a positivity into your mind and will also give you a sense of humble achievement. Looking into the future, it will also give you the tax benefit (like exemption under 80 G of Income Tax Act, etc.) once the income generation resumes post lockdown.
Lakshmi G, BSc LLB CAIIB, is a Banker at a leading Public Sector Bank in India.