- Date : 23/06/2021
- Read: 6 mins
As normalcy resumes post-COVID, it is important to take charge of your finances.
COVID-19 has had a significant impact on various aspects of our lives, including the way we manage our finances. According to the Consumer Spending Sentiment Index Report, 90% of respondents claimed that their spending behaviour has changed during the pandemic. It is likely that many of us spent less on discretionary items or experiences during this time. A few may have been able to increase their savings considerably. Yet others may have had their finances severely dented due to job losses or pay cuts or healthcare expenses.
As vaccination drives pick up and lockdowns get lifted, you would no doubt be thinking how best to manage your finances in the months ahead. Here are five ways in which you can take charge of your finances to make the best of your existing savings and sort out any neglected areas.
1. Evaluate your spending and saving patterns
Were you spending beyond your means before the pandemic and finding it difficult to manage your budget? During the pandemic-related restrictions, it is quite likely that you cut down your discretionary expenses. You would have spent significantly on essential items such as groceries and avoided blowing money on salons or eating out.
However, it is easy to slip into the greed of buying OTT subscriptions and premium packages to binge-watch movies and TV shows. Or you could be splurging on clothes and fancy accessories from websites offering big discounts. Or, although you’re spending most of your time inside your house, you might feel tempted to finally book that manicure appointment that you have been putting off for some time.
If you are in a position where you have always thought about squirrelling away savings or investments but haven’t been able to do this yet, you may want to consider taking action right away. Thanks to the pandemic, your spending would have reduced and you may have found yourself saving more. You can use this opportunity to create a budget and set long term goals.
Pro-tip: Create a budget and stick to it. Either download an application or use a diary to record your monthly expenses and track your spending patterns. There are numerous apps like Simplifi, YNAP, mvelopes that can encourage you to control your spending and live within your means.
2. List your goals and work towards achieving them
One of the biggest lessons of the pandemic is that life is uncertain. You might be out of a job, or suffer a pay cut overnight. You may have to face situations where a loved one has to undergo hospitalisation. If you were a workaholic before the pandemic hit, you would have also realised the importance of living a balanced life. If you had avoided travelling before the pandemic, you would have realised the importance of experiencing its joys.
By being financially independent, you can live life on your terms. However, it’s not a great idea to deprive yourself of what life has to offer. So, assess your financial goals for the short term, medium term, and long term. You could list them and work towards fulfilling them. For instance, your short-term goal might be to save up for an international vacation. Your medium-term goal might be to create an emergency corpus. Your long-term goal could be to create a retirement corpus so that you can be financially independent.
Pro-tip: Invest in liquid funds or save in recurring deposits to achieve your short-term goals. For your medium-term goals, look at investing in hybrid mutual funds. Invest in equity mutual funds to achieve your long-term goals.
3. Don’t hesitate to spend on your well-being
You may also want to look for measures to boost your immune system, especially during your menstrual cycle when you are most prone to menstrual cramps and body ache. Focus on your mental and physical well-being. Don’t hold back while spending on your health and allocate a monthly budget towards eating right, exercising, and even getting pampered in a spa. Consider spending on your well-being as an investment rather than an expenditure.
Pro-tip: Till the gyms and spas open up, you could consult online trainers and maintain an exercise regime.
4. Stay in your lenders’ good books
Credit card reward points are quite valuable for regular credit card holders. Personal loans can help you fulfil any requirement that needs funds. However, in an era of uncertainty, it is vital to repay your dues on time. If you are planning to take a credit card, ensure that you have the discipline to pay off your credit card dues in full before the due date. If you wish to take a personal loan or any other loan from a lender, plan your repayment strategy before applying for the loan.
If your income is hit and you are unable to repay your lenders, your credit score would be significantly impacted. This would reduce your creditworthiness as a borrower and you may find it difficult to avail of loans in the future. Imagine a scenario where your credit score plummets because you defaulted on a couple of credit card repayments – when you apply for a home loan later, the lender may either decline your application or charge the highest possible interest rates.
Pro-tip: Use advanced phone apps to remind you of important activities like paying EMI instalments, renewing an insurance policy, etc. before the due date.
5. Be optimistic but also prepare for the worst
Since COVID-19 is an infectious disease, it is difficult to protect yourself from exposure beyond a certain limit. This puts you and your family at considerable risk of contracting the virus. This may result in hospitalisation and expensive bills. During such uncertain times, it is wise to check your insurance coverage. Consult your health insurance agent and get suitable health insurance coverage for your family members and yourself. Don’t rely only on the mediclaim offered by your employer.
Pro-tip: COVID can leave you with complications like lung fibrosis, renal failure, cardiac arrest, fungal infections, and neurological illnesses. Hence, it also makes sense to augment your health insurance policy with a critical illness cover.
It is only a matter of time before lockdown restrictions get lifted and normalcy resumes. By following these tips, your finances would be in order and you would be well set to lead a balanced life. 2021 and financial planning: Lessons to adopt, mistakes to leave behind