As the pandemic of COVID-19 spreads across the world, it causes an inevitable impact on various facets of our lives. The nature of the pandemic can make people concerned about their physical health. Meanwhile, as market conditions are affected, it is natural to feel somewhat restless about your financial health as well.
However, the pandemic might also present a new opportunity for you to reconsider how to invest money and take the reins of your annual budget. More than ever before, it has become essential to pay closer attention to your finances and the types of investment on offer to make sure that every penny you earn or save is spent in the right avenue. To help you cut through the financial confusion, let us take a closer look at how to manage your personal finances during this difficult time.
How COVID-19 has affected the economy and people's livelihoods
Before looking at the solutions to managing your personal finances during the pandemic, let us review the various problems. The first problem presented by the pandemic is its direct impact on people’s health and well-being. With thousands of people being infected and several fatalities, the world is currently living in a state of medical uncertainty. The costs of healthcare have been steadily on the increase over the past few decades, which means that these medical issues could turn into financial issues as well. [1]
Moreover, with the national and global economy being impacted, there have been more layoffs that are frequent in various industries and job security is low. Indian benchmark indices like Sensex and Nifty declined 23% each in March this year as foreign investors sold equities relentlessly. Without budgeting and in absence of life insurance policies and other reliable types of investments in place, individuals and families could find themselves looking at a dire financial future.[2] Note that there is no plan known as a coronavirus life insurance policy; however, you could look for insurance plans that cover COVID-19.
How to budget your personal finances (including existing investments in market-linked products and life insurance policies)
In the midst of these uncertain times, it might be easy to be carried away by panic and make financial decisions that might only look favourable now. However, these difficult financial times can only be weathered by making a few smart decisions to ensure that your finances stay healthy for years to come –
1. It is crucial to take a second look at your predetermined budget, both monthly and annual. While this budget may have served you well for the past few years, the new difficult circumstances might call for a revamp. Make sure to cut out frivolous, non-essential expenses and push back any luxury purchases you may have been considering for a later time.
2. Make sure that your credit payments are not being disrupted in any form. While they may not appear on top of your priority list, your credit card and loan payments should be considered essential. Delay in payments or non-payments of credit, even during a financial crisis, can lead to piling up of debts, lead to higher interest payments and negatively affect your credit score.
3. Despite the panic selling, you might see around you, hold on to your long term investment plans. Despite the difficulty of the current scenario, market conditions may eventually stabilise and your portfolio may be the better for it. Moreover, if you have invested in a life insurance policy in the past, you will greatly benefit from the peace of mind it offers at a time like this. If you do not have an insurance policy, make sure to avail a life insurance policy that covers coronavirus or COVID-19 from a reliable insurer and protect the financial future of your loved ones.
Conclusion
With the COVID-19 pandemic becoming a part of our reality, it is more important than ever to make sure you are managing your personal finances effectively. Even as the pandemic negatively affects the economy and job security, well-reasoned financial decisions can help see you through to the other end. Make sure to stick to a budget, focus on credit payments and hold on to your valuable long-term investments.
References
[1] https://www.outlookindia.com/outlookmoney/finance/how-to-manage-your-personal-finances-during-covid-19-pandemic-4619
[2] https://www.moneycontrol.com/news/business/markets/investors-lose-over-rs-30-lakh-cr-in-march-43-stocks-in-bse-500-fall-over-50-5093231.html
