The Coronavirus has affected more than 7,00,000 people globally and has crossed the 1000 mark in India. The biggest pandemic of our times, Covid-19 has caused global financial markets to tumble, disrupted local economies, resulting in thousands of deaths worldwide with the numbers climbing daily.
Every financial decision you make now must be carefully planned and well-thought – Avoid panicked choices.
Here are a few do’s and don’ts for Handling your Finances during the Ongoing Corona Pandemic
1.Do: Accept the Financial Challenge Ahead
We are living through unprecedented times. The world has come to a standstill, with entire countries in lockdown. Remember that there is nothing you could have done to predict and plan for this. With the whole nation and the world going through a financial crisis (on top of the ongoing health crisis), financial planning is a massive challenge.
Smart Tip: Instead of worrying over what could have been done, be ready for the paradigm change ahead. Get mentally prepared to reduce spending and to stretch your savings for the next few months.
2.Don’t: Buy Too Much Supplies & Groceries
Yes, it’s a good idea to stock up on household needs – groceries, vegetables and fruits, cleaning supplies, etc., so that you can avoid stepping out of your house. However, hoarding too much will lead to negative consequences on your savings.
Spending too much (more than you generally buy) on food, groceries and toiletries will lead to long-term financial problems. With reduced work and companies delaying salaries, you may not have sufficient funds to pay your bills, EMIs and other financial commitments. Also, remember that every edible item you purchase comes with an expiry date. Purchasing too much or buying things that you don’t eat/use is just wasting money.
Smart Tip: Limit your grocery purchases to what you need for the next two weeks. Don’t store more than that.
3.Do: Cut Back on Non-essential Spending
As you sit at home, you may be tempted to online purchase appliances, apparel and other non-essential items that you have been planning to purchase for a while. However, now is not the time. Try to reduce extra spends and cut down non-essential purchases.
Smart Tip: Start building your emergency fund if you already don't have one. Plan your finances for the long-term, so that you can cope with your bills and essential purchases, even if something unexpected were to happen like a family member losing a job, a reduction in pay or a temporary layoff.
4.Don’t: Panic Sell your Investments
The national stock market has seen significant dips in the last few weeks. This has led to several investors panic selling their holdings to avoid further losses. However, the critical thing to do right now is – Nothing. Yes, leave your money where it is and do not give in to the temptation of emotional selling.
If you have invested in the stock market, you are likely to see losses in the short-term. However, you can be sure that your stocks will bounce back eventually, once the situation resolves.
Smart Tip: If you're prone to making emotional, financial decisions, avoid monitoring the stock markets daily, so that the constant ups and downs do not stress you out.
5.Do: Limit Taking Risks
This is the time to be extremely cautious and pragmatic while making investment decisions. Do not make any financial investment, just because a friend or colleague says it's the right thing to do now. Make sure to do your research and evaluate an investment thoroughly before you go ahead. When investing, it's critical to focus on long-term trends and not temporary fads.
Smart Tip: As always, you need to first focus on health and term insurance, if you don’t have it already.
6.Don’t: Speculate and Buy Stocks that you Think will do Well
The stock value of companies like pharmaceuticals, toiletries manufacturers, sanitizers and PPE makers are doing well right now, thanks to the ultra-high demand for their products. However, that doesn't mean these companies are suitable investments for the long-term.
Smart Tip: Avoid investing in companies that are doing well during the pandemic. Make sure to analyse the long-term investment value before investing in these companies.
7.Do: Limit Travelling
Airlines and hotels are the most hit due to the ongoing Corona pandemic. To restore customer confidence and to increase demand, airlines and hotels are offering tickets and stays at discounted prices. You may be tempted to make use of these offers and plan for future travel. However, travelling for pleasure falls into the non-essential expenses category, and it's highly recommended that you put off travel plans, for now, to avoid depleting your savings.
Smart Tip: Besides the financial impact, travelling also exposes the elderly, young children to unnecessary health risks.
8.Finally, Do: Rely on your Network to Help you Get through the lockdown
As we stay inside our homes, isolated from friends, colleagues and extended family members, it could lead to feelings of isolation and depression. Lean on your networks – use video calls, social networks to connect with friends and family, and make use of the downtime to your best advantage.
Ease your Financial Worries with Smart Planning
Billions of Indians will face severe financial challenges in the coming months. EMIs, utility bills, insurance payments, school fees for children – the expenses are numerous during this time of the year. However, with the ongoing economic crisis compounded by the Corona pandemic, it may be challenging to handle finances, with reduced income. Keep reminding yourself that the situation is only temporary and plan for recovery. Instead of succumbing to panic and fear amidst the prevailing uncertainty, stay calm and focus on the long-term.
By following the do’s and don’ts listed above, you can prevent the situation from going worse and manage to stay afloat without falling into further debt traps.
Stay Safe, Stay Healthy & Stay Smart!