What to do and not to do during the COVID-19 Pandemic?
The Coronavirus has caused turmoil in the global economy, making many people insecure about their finances and jobs. It’s hard to make sound financial decisions in these uncertain times. With financial anxiety at an alarming rate, it is difficult to make rational decisions about managing your money. If you want to ensure your financial future, it is important to avoid making money mistakes and make smart financial decisions.
How can you overcome financial crises at a personal level? We have listed a few tips and tricks to help you manage your finances during this financial crisis.
Do: Build your emergency fund
A job loss or a pay cut could mean facing an actual emergency. You may not have enough income to cover your bills. This is the right time to start building your emergency fund. Experts recommend having three to six months’ worth of living expenses in an emergency fund. Repurposing spent money is a great way to increase your emergency savings quickly. You can use the money you save on your commute, dry cleaning, and meals to pay for your emergency fund. You can use this money to fund your emergency fund. You can also put this money towards your emergency fund, as long as you don’t indulge in leisure activities (thanks for home quarantine).
Do: Manage your spending habits
You may feel insecure about your finances due to the ongoing financial crisis. Take a look at your expenses. Reduce your non-essential spending and only spend on the essentials.
Prioritize your monthly bills. Rest can wait. Prioritize essential monthly bills like electricity, rent, insurance premiums, EMIs, etc.
Buy products in bulk. You can buy as many items as you want at a reduced price by looking for ways.
Do: Cancel non-essential subscriptions
Amazon Prime and Netflix may seem like necessities because of the country-wide lockdown. These are luxury items, and you might not be able to afford them if your finances aren’t in order. Instead, stick to YouTube and other free media sites, read the books you already have and continue with your DTH subscription. These simple steps will help you save money in these uncertain times.
Do: If necessary, apply for an RBI moratorium
The Reserve Bank of India asked all Indian banks to offer a 3-month moratorium on all EMI payments to end the financial crisis. Your bank can hold your EMI payments until your financial situation improves. If you cannot afford the payments, do not opt for a moratorium. A moratorium allows for immediate relaxation but also extends the loan term. When your EMIs are deferred, your outstanding balance will also accrue interest.
Do: Get a loan to get out of immediate trouble
Your cash flow may have been affected if you own a business. You still have to pay your bills. The government has announced relief packages for SMEs. To ensure liquidity, the RBI has decreased the repo rate so that banks can offer loans at lower interest rates.
You can take a short-term loan if you’re experiencing income disruptions such as no or reduced pay. While a loan might seem like a better option, it is best to consider it as a last resort. If you don’t know if you can repay the loan, you shouldn’t take it on. Consider your current financial situation and how likely you are to recover.
Do: Keep your job
It would be best if you protect your job in this COVID-19 crisis. Companies would cut back on hiring because of the current Pandemic.
Do not switch if you are unhappy at your job. For the next few months, you can keep it and then switch.
Do: Earn extra cash
Find ways to make extra money. You might consider selling items you don’t use anymore, starting a freelancing business, or getting a part-time job. These activities can bring in small but significant amounts of money over time.
Do: Review your insurance coverage
Insurance can help you avoid a crisis. You should have sufficient insurance coverage, not the minimum. This applies to all insurance policies that you currently have or plan on purchasing – life, health, disability, etc.
Do: Plan to be future-ready
The COVID-19 crisis demonstrated the fragility of our healthcare and economic systems. Take a look at all the difficulties you are facing right now. Do you have enough money in your emergency fund? Are you able to afford adequate insurance? Are you too much in debt? Are you able to keep your job? To cover these difficulties, make a detailed plan.
Don’t panic; sell your stocks
It’s difficult not to be influenced by recent stock market crashes and the temptation to sell stocks. History has shown that markets always recover over time. You will be unable to participate in the market recovery if you make the financial error of selling your stocks immediately. Panic selling your stocks can lead to financial loss and unfulfilled goals.
Avoid: Buying stocks
Investors rush to purchase stocks after the market crashes. If done with caution, it can be a wise move. Don’t risk missing out by investing recklessly. To determine the risks, you are willing to take, look at your financial situation. Before investing in stocks, make sure you have enough money in an emergency fund.
Do not withhold payments without informing lenders or providers
You should contact your providers or lenders if you cannot pay your actual payments. You may be offered a moratorium by your lenders, which allows you to delay payments for a few more months or until you get things back on track. You will be considered a defaulter if you stop paying your bills without notifying the lenders. This would harm your credit score. If your credit score drops, it will be harder to borrow money when the crisis is over.
