In such times, every single penny of your hard-earned money needs to be working hard for you
The current crisis that has occurred because of COVID-19 and it takes further hold over the economy. It’s impact is beginning to be felt as many news reports have mentioned poured in salary cuts and job losses from many companies across all different types of sectors.
None of us have predicted such situation, and it’s likely to be a first-time experience. And if in case you are not down by this till now then you should count yourself very lucky and prepared also for conditions like this. So below are the 10 tricks that helps you to be prepared in case like this.
- Liabilities are such thing which almost everyone has, while liabilities are not something good to have even normally, during such times liabilities can be a terrible drag in your cashflows.
- Keep track of your liabilities by making list of your liabilities and starting with the one with the highest interest rate. A good way to categorize liabilities are criminal (credit card debt, personal loans), bad (vehicle loans, consumer durable loans) and not-so-bad (home loans, zero-EMI loans).
- Always looks for ways to estimate all of your liabilities, especially the high rates one.
- Moratoriums: Moratorium is a solution that only defer the dept, it doesn’t estimate it. So in future after some time you will realize that you are ending up paying more interest over time.
Which means Moratorium is good to be used for high-rate and long-tenures, where should use it in only desperate situations low-tenure secured debt.
Insurance policies –
Make sure they are up-to-date and adequate
- There are two type of insurances which are very important specially in current situation, Health Insurance & Life Insurance (pure-cover term insurance).
- Health Insurance – Many have the corporate cover but that will not be available in not employed anymore in current situation, So having adequate personal insurance is must. You can consider any amount based on number of people in your family and in these type of case family floater an effective option.
- Life Insurance – Having many policies is different from having adequate life insurance. So always make sure you have enough insurance to cover your liabilities as well as key family financial goals.
- Term insurance – It will not be available for people who are not currently employed, in case you don’t have adequate term insurance, now will be a good time to take it.
Start working on it
- Always reach out to the people you know, If ever there was a time to cash in on your personal equity, this is it
- Don’t restrict yourself just to your domain, Look for options also look at adjacent once.
- Keep updating your profile to reflect your best face.
- In these months April, May & June expenses have come down dramatically.
- Talking about categorizing the costs into these expenses:-
– Essential ( utilities, food, some entertainment, etc. )
– Fixed ( Insurance premium, rent, school fees, liabilities, etc. ) and
– Discretionary ( entertainment, shopping, etc. )
Contingency fund –
Both Quantum and Safety
- Ideally these should be funds in totally safe and liquid instruments such as bank (stick to the top 3-4 large ones) sweep-in FDs and liquid mutual funds
- Most probably you have parked aside some funds as an emergency purpose. Like the typical thumb rule to follow is six months expenses (food and essentials ) for double income family and nine months expenses for a single income family
Upgrade & Adapt
- In every Business things change time to time and you likely to use the time to available and understand the likely wise changes in your business and how you need to adapt them.
- To adapt the new skillsets firstly you need to identify the what fresh skillsets are likely to need invest time in upskilling yourself.
Job Loss –
Remember, there is no need to shame in losing your job
- You have parents and kids
Sit them down and explain the matter why this happened. Explain them about your adequate plans to handle situations like these.
- Assuage their worriers by telling them as much as you feel is necessary.
- We all know, It happens everywhere. In fact in this changing world, this is something that is going to be commonplace going forward, and already so in developed countries.
Review your Finances –
- Reviewing own finances is the most important thing that people put off for later. And you know What? tomorrow never comes, But we all know unpleasant surprises do.
- Clean up your portfolio to get rid of junk and other inefficiencies. And always remember that there’s no better time then now to evaluate your goals. Align them and prioritize your investments.
- You can always overcome a situation with right mindset and a decisive approach. To echo Winston Churchill’s famous quote – “Never let a good crisis go waste.”