A family man, who is shouldering many responsibilities for his family, is trying to keep things smooth for his family in this phase! He is managing cash flows, looking at how to continue investments for future goals, considering cutting down expenses wherever possible and struggling to keep his career afloat.
COVID-19 has taught us many things. We have learned how to be self-reliant, how to keep up our good health and safety and how to remain hopeful.
When all sections of our society are struggling, middle aged person is managing multiple fronts. How he can maintain financial well being for now and in future? What he should learn from this phase?
Here are some simple tips-
- Stay calm and remain hopeful:
A family where, there are kids and ageing parents, a person manages many things which need equal attention. He is looking for bright future of his kids, but concerned about health and well being of his parents. In such scenario, when unprecedented situation like this strike in, anyone can find it difficult to keep going smoothly.
Health and financial well being are of prime concerns. In this situation, please stay calm and remain hopeful. Whole world is facing multiple problems so, you are not alone.
Stay calm and remain hopeful for bright future.
- Restructure your personal finance elements:
Utilize this time to restructure your personal finance elements like, investments made so far, insurance policies taken, loans taken, assets that you possess. Evaluate and make changes where needed.
If in this phase also, your income flows are smooth, then make required investment if not made yet, create a contingency fund, sell assets if they are depreciating and are of no special use, make a complete record of your investments, insurance, cash reserves etc.
If your income flows are disturbed in this phase, then make changes with already made investments, make records, etc. Go for any new investments, insurance etc when your income is back to normal. That time prioritize applying for insurance policies.
- Check on your insurance policies:
Insurance is crucial element of personal finance. One needs to have adequate term insurance and personal health insurance policy.
If you have smooth income flows today, then please apply for suitable term insurance and health insurance on priority. It is a ‘must’ for everyone. Term insurance takes care of financial well -being of your dependents after you. Health insurance insures us from huge costs which occur from medical treatments.
Soon, as per IRDA guidelines, short term health insurance policies for ‘COVID-19 care’ will be available. You can apply for that at least to begin with. But, please have ‘Standard health insurance policy’ for you and family.
If you are covered under ‘group Mediclaim’ by your employer, then please check its terms and conditions.
- Spend from your liquid investments if you don’t have ‘emergency fund’:
Creating a ‘contingency fund’ is crucial. You must have a contingency fund equivalent to 12 months of household expenses. If you have not created it, please create one if your income is smooth flowing today.
Those, who don’t have their emergency fund and also struggling with cash flows, they can spend from liquid investments made such as short-term bank FDs, short term debt mutual funds etc. Once you exhaust these funds, then liquidate your other investments such as equity funds, gold etc.
- Look for alternative sources of income:
Depending on single source of income is not going to help anymore. This is one of the major learning from this phase.
So, consider passive sources of income. If you have any hobbies or skills, capitalize them, learn more from those skills and upgrade yourself so, you can earn some income.
If both husband and wife, are not working, then engage non-working spouse in such activities which can make them happy, upgrade them and get a source of income.
- Re consider your loans taken:
You must have some loans taken like home loan, vehicle loan, etc. Considering current situation, a moratorium has been given to all term loan holders.
You can take that moratorium if your cash flows are disturbed today. Before applying for it, please connect with your bank personnel. Understand its impact on remining loan term.
You can link your loan to repo rate, which can reduce your interest rate and your EMI outgo will be lesser. You can take suitable decisions upon discussions with your respective bank personnel.
In future, apply for loan when it is really needed.
- Make a budget and stick to it:
Making a budget and sticking to it is what our parents and grandparents followed. That’s why they could increase their standard of living and afford to give better life to their children.
Its time to follow that and learn this ‘old school theory’!
Since a few years, we experienced surge in using credit cards, people started applying for personal loans to buy expensive things, shopping on almost every weekend if there are attractive discounts. This all added to ‘lifestyle inflation’.
Today, in this phase, many families are suffering due to this as they have huge credit card dues to pay, loan EMIs are waiting and assets they bought using this are not getting used due to current situation.
So, every family has to make a budget and stick to it no matter what. This will automatically curb spending habits and items which are needed the most will be purchased.
For this follow two simple things-
- Start writing your monthly expenses. This will tell you approximate figure of monthly expenses. You will automatically get to know, how much you are spending on ‘discretionary’ items. This will help you to curb such expenses like shopping, hoteling, etc.
- Then, follow one formula to draw a budget i.e
Your total monthly income (-) total monthly investments for future goals= Your monthly expenses.
Today is tough but, tomorrow will be bright! We should work on our ‘Today’ to make a better ‘Tomorrow’!
So, dear family man, please stay hopeful. You along with your spouse can make it work b following some simple things.