By Deepali Sen
Unprecedented times like these can be the best teachers. They nudge us towards conservancy, resolve, fortitude and self-reliance. They urge us to take that leap of faith during uncertainty, gravitate towards basics and worry only about the controllable. Fighting a faceless pandemic as a part of a crisis, working from home, practicing social distancing, braving equity market
volatility, facing bad debts and mismanagement across many finance companies and ultimately suffering job contraction, pay cuts, muted (if at all) increases and incentives. Amidst all this the good news is that ‘this too shall pass’.
We must promise ourselves to come out of these unique and extremely challenging times, financially fitter and stronger. Following is a quick guide to ensure that.
- Cover your dependants through term plans
- Have adequate medical insurance cover
- One of the biggest drains on finances can be illnesses, of self or people whom one cares for. Fool-proof your personal finances by taking medical insurance of most probable ailments
- Set aside money for at least 4-6 months of expenses for any contingency like a job loss, delay in salaries, unavoidable needs of family members
- Streamline your expenses
- Budget your expenses. Try and cut them to the extent of a pay cut.
- Stick to making only the essential and critical expenses. Delay on the feel-good and impulse purchases.
- Credit cards usage can trigger a false sense of money’s availability.
- Cut on your outstanding loans
- Prepay them if surpluses are available.
- Increase EMIs, if possible
- If you have multiple loans, reduce the priciest and the longest tenure one at the earliest
- Be disciplined about investing
- Don’t default on your monthly commitments. Remember that at these discounted levels, SIPs (Systematic Investment Plan) make an increasing sense.
- For portfolios which have suffered a loss, please hold on if the goals are at least 5 years away.
- Don’t convert your notional losses into real ones
- Dot your i’s and cross your t’s
- Good house-keeping of the financial and property papers is essential.
- All your financial holdings (investments, insurance policies, demat accounts, bank accounts) should have a nominee.
- Necessary passwords/ nominee details on various financial, real estate and physical assets should be shared with the stakeholders, wherever needed.
- Write your will.
- Reduce the clutter in your life
- I am reminded of this beautiful quote by Chuck Palahniuk. It says, “the more things you own, the more they own you”.
- All these years we have laboriously worked towards building a life of comfort, a life of indulgence and abundance. We have been busy amassing things for enhancing our comfort, fine tuning our wants, and then we get trapped in those luxuries and spend our time and energies (esp. finances) by regularly upgrading them, replacing them, maintaining them and so often throwing them because of underuse. It puts an avoidable stress on our money.
- This is an opportune time to rid ourselves of such items, put them on resale websites like OLX. The sale money will hopefully be handy during these pay cut times.
- Let’s not turn “our houses into warehouses”, as Sadhguru Jaggi Vasudev often refers to our current lifestyle as.
Please remind yourselves of the serenity prayer, “God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.”
(The author is a certified financial planner, founder partner of Srujan Financial Advisers LLP and author of ‘Why Greed is Great!!!’)