How to Make Your Finances Pandemic Proof

Over the weekend, I got a call from my friend and she was concerned with this upcoming news of another lockdown due to rising cases of COVID-19. She said "Last year, the pandemic hit my finances badly and I had to go through many difficulties, even though I had my savings it wasn't enough to sustain". She added further, "In case, another pandemic takes place, I want to ensure that my finances are not affected. So, can you suggest how I could protect my finances form future tragic events..."

To which I responded, "Such events are unpredictable and you require taking few steps from time-to-time to make your finances resilient and start maintaining financial habits like budgeting exercise, goal setting, etc."

Now is the time to take a critical look at your approach towards securing your finances from any pandemic crisis in the future. Here are steps that will guide you on how to reassess and plan accordingly to maintain financial security:

1. Monitor your expenses

   It is essential to monitor your daily expenses carefully to understand your cash flow. The pandemic has made us rethink on our priorities. Begin by making a list of expenses that separately lists your discretionary expenses from fixed expenses.

   Try to trim on non-essential recurring expenses like monthly subscriptions; you may notice that either you have forgotten a few or haven't used it in a while. You need to maintain a discipline of not blowing out all your earnings every month and the idea is to have a leaner list of expenses.

   Understanding your expenses and how cutting it down can add up to your savings could help you build a stronger corpus for emergency fund that holds up to 12 to 24 months of expenses including loan EMIs. You must initiate saving from your income first and then look at spending from the remaining balance.

2. Create additional income sources

   After analysing your expenses, if there is not much room left to cut down on the expenses, it's time you add more income by creating additional income sources.

   It is always advisable to have a secondary source of income that can add up to your fixed income. These could include freelance projects with your expert skills and hobbies, or selling items you no longer require, or some consultancy work, a rental income, periodic investment returns, etc.

   You do not need to find a second job, just create an additional revenue stream to make extra income, which you could use towards investments or pay off any debt. This will also help you earn more, save more, and be more stable in tough times.

   However, you will be required to put in extra efforts to actively earn that secondary income and upgrade your skills constantly to meet the changing industry requirements.

3. Re-evaluate your investment strategy

   Ever since the pandemic broke out, Indian markets have witnessed high volatility and there could be changes in the investment strategy for an individual. You need to re-evaluate your investment strategy to align with your current S.M.A.R.T financial goals.

   As you will be making an investment or rebalancing existing investment, keep a long-term horizon. In case, there is a market drop you should be able to hold on your investment without any pressure of selling. Like the 2020 March lows scenario, where the fear of markets falling further resulted in investors exiting their investments without assessing the repercussions.

   Make sure that all your investments are not in one place, you must consider diversifying your investments into various asset classes to mitigate the risk and reap maximum benefits. An appropriate blend of both equity and debt instruments gives a balance to your portfolio. But, do assess your financial potential and risk-taking ability before making any changes in your investment portfolio.

4. Take care of your Health

   You may be thinking of how taking care of your health relates to having pandemic proof finances. Well, the above mentioned points will have no value if you are not in pink of your physical health.

   Needless to say, if you maintain a healthy lifestyle, the probability of you getting affected with any medical emergency reduces. Adequate exercise and good nutrition is very important in today's scenario.

   In addition, just as it is crucial to maintain an emergency fund, you should also have an insurance cover for life and health. Insurance cover helps you protect your income, assets, and most important your families from life's unexpected risks.

   If you hold any existing insurance policies review them for better deals with maximum coverage and if you don't, then immediately build an insurance cover. Consult your insurance agent for adequate insurance cover as per your needs to indemnify the risks to life and health.

5. Invest in yourself

   After witnessing these unprecedented events including salary cuts and job losses, it imperative to invest in yourself to protect your finances in future. Even if you have a great job currently, keep working on upgrading your skills, this will ensure you are employable at new jobs in different fields which extends your opportunities in times of need.

   A recession due to economic downturn could create havoc for your finances, but if you are prepared with required skills and with an additional source of income, you will survive the tides. Hence, it is required to have the right mix of assets and keep your debt low, holding emergency fund, good credit score, and multiple source of income can help you protect your financial well-being.

   Consequently, if you update yourself with financial knowledge and observe the volatile nature of markets and check historical trends, you may understand the right time to invest, hold and withdraw. Financial literacy will empower you to make informed investment decisions for yourself and your family.

All the above mentioned points will help you make your finances pandemic proof and if you are well read with financial information, you could be prepared and confident to ride out any financial storms or pandemic that may come your way to create financial inconvenience.

PersonalFN understands that not everyone holds the adequacy of financial knowledge and here we encourage you to enhance your financial knowledge and become a 'Financial Guardian', who understands the financial planning elements to guide your family through making the finances pandemic proof.

Financial literacy equips you with the right knowledge and you can give your family members the financial guidance they require to make sound financial decisions to have a better financial future.

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It also offers a host of other benefits to help you make informed investment decisions. Read here for complete details.

So, if you wish to empower yourself with financial knowledge and make your finances pandemic proof for future, enrol to "Certified Family Guardian" course today!

Warm Regards,
Mitali Dhoke
Jr.Research Analyst

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