Managing your money is important and it becomes especially important during a crisis like the ongoing Covid-19 pandemic. We are starting to see some economic consequences starting to show up, but what is less visible is the financial stress caused by the uncertainty. An individual’s financial state can affect his or her mental health and also well-being. 

The ongoing Covid-19 crisis has made us feel like we are inhabiting a world that was completely unknown to us just a month ago. All of us have been impacted in some way or the other but reality has hit harder for those who have experienced pay-cuts and job losses. This crisis is also allowing us to determine ways to manage our finances better. 

Additioanal Reading: COVID 19 Emergency Loans by Different Banks

Read on to get an answer for, how can you budget your expenses to stay financially and mentally resilient during these times.

Tips on Money-Management During Crisis

  • Study Changes in Your Expenses - The crisis may have brought unexpected changes to your work and lifestyle. Study your new financial situation—what is good about it, what can be improved, and what are the actions you need to urgently take to avoid a downturn? Analyse your finances and make careful decisions for the near future and the long-run. 

  • Assess Your Spending - If your income is somewhat affected by the crisis, you can think about using your savings to supplement it. Such savings can help you decrease your debt, build an emergency fund, or top up your savings. If your financial position is good and you have no debt combined with healthy cash deposits, you may use the surplus to assist a family member or a friend or invest now so that you can future-proof your finances.

  • Planning the Future – A single source of income can pose a certain amount of threat to your financial situation. In case the crisis is preventing you from working then this could negatively impact you. You may want to think about how you can leverage your skills to begin a side-job, use your expertise to build some extra cash, and diversify your income sources. This may require you to start enhancing your skill sets to build an additional source of income.

  • Prioritize Clearance of Dues - Credit card dues carry interest rates that are generally 2.5-3 times of those on terms loans. Credit card dues should be the first and top priority to be cleared. Similarly, you may want to prioritize other dues and ensure that you are not building up on debt.

  • Stock Up but Avoid Splurging - The recent lockdowns have made stocking up essential. However, hoarding and overspending on groceries is not a good idea. While it is wise to avoid supermarkets and crowded places, just buying enough supplies for a month should suffice. Governments across countries are ensuring that there is no restriction on the flow of essential goods and hence their availability will not be an issue. Efforts are being made to restart online grocery delivery everywhere as well.

  • Do Not Panic Sell - The global stock markets have seen a freefall ever since the emergence of Covid-19 crisis. This is making investors uneasy. As portfolios crash, there is a strong impulse to sell stocks and minimise losses, but this is the worst possible course of action. By selling stocks at a lower price, paper losses become real. The value of most stocks would stabilise as soon as normalcy returns. By selling shares, investors will only monetise their losses. Hence, it is best to hold out and wait for the volatility to end.

Managing Cash Needs

Here are some of the credit options you can consider if you need surplus cash during this crisis:

  • Pre-approved personal loans: Often offered against credit history, good repayment of past loans, active and clean usage of credit cards, these loans are available across multiple marketplaces and offered directly by banks to their salary account/credit cardholders. These are highly recommended for those who have availed loans in the past and repaid without any defaults.

  • Home loans: People who have invested in fixed assets and have debt-free property, can avail home loans at attractive interest rates by offering their assets as collateral.

  • Advance against financial assets: Loans can be availed against financial assets like stocks, mutual funds, and traditional insurance products like endowment plans.

  • Overdraft/credit cash lines: While micro, small and medium enterprises (MSMEs) are offered this against the stock, invoicing, and contracts, among other things, salaried customers are offered the line as a multiple (3-5 times) of their monthly income. The best features of these products include attractive rates of interest (14-21%), interest accrual for each day of usage and flexibility of repayment.

Additional Reading: COVID-19 Financial Resource Guide

Guarding Your Health and Wealth

During this global pandemic outbreak of Covid-19, your health becomes of primary focus. You must take appropriate care of your health, stay at home, self-isolate and observe proper social distancing. As the uncertainty around the Covid-19 symptoms increases, your health must be properly insured. Similar measures must be taken for your wealth. If, for example, the major source of income for you is from rent, get it insured to protect your wealth. Several new-age platforms are offering completely digital financial products with paperless processes and no human contact. You can avail such services to ensure that you guard your health and wealth.

End Note

The global Covid-19 crisis warrants for all of us to exercise caution and take care of our health, for the sake of everyone else. Having sufficient financial resources to ride out the waiting period is a crucial part of this exercise. Follow the above-mentioned recommendations to ensure enough financial security during this period of a global pandemic. Stay home, stay safe!