Top 6 Tips To Manage Finances During COVID-19
The ongoing COVID-19 pandemic has brought in a lot of challenges for one and all. A lot of people have been hit hard due to the requirement of a new normal, which led to a loss of income and means to make a livelihood. Job cuts, pay cuts, and lesser business growth opportunities have affected most along with the mental stress during these challenging times.
Challenging times bring in the need to rethink and channelize the resources optimally so that one can sail through the rough patch and stand tall once again as we overcome the pandemic. Proper management of finances during COVID -19 is the need of the hour. So, here we present the top 6 tips to manage finances during COVID -19.
Tip #1: Let's go to basics
The Covid-19 pandemic has taught that we can all survive on the basics. With all the nationwide lockdowns happening all across the globe, people were left with no option, rather than staying at home. So, there was an absence of a social life which includes going out for dinners, attending parties with friends, meeting new people, going on vacations, camping, or even going to the gyms. Almost everything which involves stepping out of the house halted apart from the need to go out to get the essentials. Well, to some extent, for safety reasons, most stuck to home deliveries to get the necessary things delivered at the doorsteps.
We survived with the basic needs fulfilled and inspite of the lack of social life. So, the pandemic taught us that when need be, we can cut down on things and expenditures which are not mandatory, which includes entertainment and leisure activities. Say for example, rather than going to the gym, why not start practicing yoga at home!
Tip #2: Check your financial health
The pandemic brought much focus on the mental and physical wellbeing of all, due to the mounting stress. Another aspect that also came into focus is financial health. To manage the finances appropriately during the pandemic, it is first important to assess where we stand. Checking the financial health will give a heads up on how things are and how it can be planned going ahead. Now, this is an ongoing process as the portfolio needs to be checked and assessed to ensure that optimal returns are being generated, after regular intervals.
It is required that one checks their individual credit report periodically for accurate information. All financial assets such as bonds and stocks or savings need to be tracked and documented as inventory. This document will act as a quick reference. Moreover, other important documents related to insurance, investments, home, the vehicle needs to be kept handy.
Tip #3: Make a new budget
Due to the pandemic, there has been a general shift in the expenditure pattern. So, this calls for reassessing and updating the budget. Moreover, the unsettling time also calls for updating the budget to cut down on unnecessary expenditures and save more for the future.
It has been generally noted that for most households, the shift in pattern has been due to the home working environment, most people have cut down on commuting cost, which includes reduced petrol costs due to lesser use of the car to go out. However, there is a rise in utility bills since more time is spent at home. Similarly, a rise in grocery bills is noted along with lesser dining out costs. These changing patterns in expenditures call for a re-evaluation of the budget to identify new and appropriate heads and allocate funds based on expenditure patterns.
Tip #4: Reduce Debt
While planning finances, going debt-free should be targeted. Though during these tough times, it may be a challenge to go debt-free, but efforts can surely be made to reduce the debt as much as possible. Proper financial strategies and budgeting will help to channelize the funds in a more directed manner, wherein all the necessary aspects are covered along with provision for the future, in terms of savings.
For debts that are already taken, it may be worth checking with the creditor as many extended support in the form of reduced interests or longer repayment term.
Tip #5: Factor in Emergencies
Emergencies are always unexpected and unplanned, just like the ongoing pandemic. It is a worldwide emergency situation, which was totally unplanned.
In personal finances too, emergencies need to be factored and proper funds should be allocated to meet these unforeseen events. An emergency fund should be treated as a different head in the budget and some funds should be allocated to this head every month. This way, the fund can be created in an easier manner without interfering with the other expenditure heads. However, one needs to be cautious while handling emergency funds and use them only when there is a real emergency and not some miscellaneous expenditures which were not included in the budget, say for example, repairing the car or some household purchases.
Another point that should be remembered is that after using the emergency funds during an emergency situation, be sure to rebuild it once again to meet the rainy days in the future.
Tip #6: Reduce Risk
The pandemic is just not the right time to take risks. Be it stepping out of the house without a mask and a sanitizer or handling the finances, risk should be minimized in every possible way. Now, risks can be minimized in two ways, one is by choosing risk-free financial instruments while investing and the other is planning finances along with the consideration of unexpected situations. The second option calls for having adequate insurance as a part of the financial strategy. This will not just minimize the risk but will also provide a cushion to the family to meet contingent and unexpected situations of life.
It is not a good idea to make assumptions, rather, it is advised to make financial plans considering the unforeseen situations. So, it is best to include risk minimizers such as insurances to provide support and secure the family.