If anything this whole Covid situation has taught us is how to take proper care of ones physical as well as financial health because time is not always the same. The proper management of money will surely help us in fighting such situations in life.
We as a financial planner would suggest these three standard practices in money management so that you can fight any bad times with ace.
Always! Always! Save more than you spend
Make this your way of living, always make sure to save more than you spend. In fact spend what is left after saving. This lock down has made it very clear that what we actually need for our living is much less than what we used to spend. In this lock down the spends have reduced dramatically leaving us with the realization that what we thought we can’t live without was nothing and we can live without many things. By over spending today we are sacrificing our life style in future and thus saving and investing less.
Remove the burden of debt
Admit this; many of us always buy things first and pay later and we are so much used to this facility that we hardly think of extra burden that it brings with itself. In short, we buy on credit. Right from buying a house/ car on loan, to paying for clothes, toys, restaurant bills, online deliveries on credit cards to credit card balance transfers to another credit card. Our life revolves in a vicious circle of credit cards and EMI’s. There is no problem with this if you can control your expenses and repay on time, and if not you are falling prey to the debt trap without even realizing. You will not realize how much over the budget you are going until it is too late.
Now that you are at home, with fewer outlets for your cash to be spent, use it wisely in repaying debt that you can and definitely need not to carry forward. Buying consumer durables on credit or overdrawing on your credit card limit is detrimental to your overall financial health. Not only can too much debt make us overspend beyond what we can afford but also the interest payments come back to bite.
Plan your future
When you have large spends in future, it’s not enough to just save for them. You need to have a plan. The current crisis has shown us that the worst-case scenario can come true. For so many businesses, it’s a time where revenue is out of the question and they are bleeding cash.
Business owners find that they are in a tough bind and being loyal to the business versus personal expenditure is so tough. In such situations a pre-defined plan of action around known large-sized expenses can be helpful. A financial plan that enables you to withdraw from growth assets, an amount earmarked for a specific goal much in advance and move it to a stable investment option is one such tool that can be used.
Its in times of crisis that we can appreciate the important of being prepared. Its never too early to start preparing your finances so that we can tide over the next crisis whenever it may come.
Happy Investing!
Mutual Fund is subject to market risk please read offer related document carefully before investing.