Hello Readers!
I hope you are safe from COVID-19!
Currently, we all are living in an unprecedented time, where everything is uncertain. Although, everyone is praying for the situation to get normal and hoping for the best to come, at this time being financially prepared is everyone’s priority, to tackle the problem that would arise from uncertainty.
This pandemic crisis has turned the life of people upside down, globally. Many people lost their job due to long term complete lockdown. Loosing during this crisis has made it difficult for people to tackle their financial and basic needs.
Some people are there who acted smartly in their good days and build a good Emergency Fund for emergencies like now. Now it’s the time to use your emergency fund, but you have to use it smartly, as we are unaware till when this uncertainty is going to last.
Here is some approach, you can consider making sure that you use your emergency fund optimally.
DO NOT WITHDRAW ALL YOUR EMERGENCY FUND IN ONE TIME
The very first thing that you have to do is analyze how much you have in your bank account and how long it can carry your expenses. Also, at the time you leave your job, you may be provided with some pending payments. You can use this payment for your expenses, it will help you save your emergency fund from being used, for a maximum of one month.
You have lost your job during a crisis, it means that this is the time, you must go cutting your additional expenses, without affecting your, and your family’s, overall well-being. Reassess your financial needs, it will help. Do not cut down your debt repayments and non-negotiables like children’s school fees, do consider them.
WITHDRAW YOUR MONEY SYSTEMATICALLY AS PER YOUR ACTUAL NEEDS
Now calculate your monthly expense, including your basic financial expenses, your debt repayments, and other necessary expense. Let us suppose your total expense calculated is equal to your take-home salary.
Assume that you have created an emergency fund equal to your four-month salary, well it is bigger than your required monthly expenses currently. Here I would suggest, don’t withdraw all your emergency funds in one time, instead withdraw it in a staggered manner.
In case if you have built your emergency fund in liquid funds, you can use a systematic withdrawal plan set to a monthly withdrawal.
WHAT TO DO WITH SIP- STOP OR CONTINUE?
Well, financial experts say it’s good to continue your SIP during down markets, it helps to create a strong portfolio. If you have saved for your SIP installments in your Emergency Fund, then for sure, continue it. But if you haven’t, here I suggest instead of stopping your SIP, pause it. You can pause you up to a 6-month SIP installment. You must be sure about your talent, and be confident towards the Indian economy, for sure you will find a good job in a period of six months, which an effective emergency fund should cover.
Last, but not the least, once you are back in a new job, replenish your emergency fund first before any other investment.
For any kind of investment query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).