The COVID-19 crisis has dealt a huge blow to the economy. This means we’re looking at job losses and reduced income. Here are some important financial takeaways from the crisis.
To say that 2020 has been a whirlwind would be an understatement. The COVID-19 pandemic along with the economic recession and oil crisis that it has brought along with it only spells despair. It’s been four months since the COVID-19 pandemic surfaced. With the number of cases rising everyday in India, the chances of of all this going away anytime soon are only getting bleaker. The pandemic has also dealt a huge blow to the economy – marquee companies have announced pay cuts, laid off and furloughed their employees. The writing is on the wall – we’re now staring at job losses and reduced income.
Here are four financial takeaways from the COVID-19 crisis:
Having an emergency fund is non-negotiable
In times as uncertain and dynamic as these, there’s nothing probably more important than having an emergency fund at your disposal. The thumb rule to creating an emergency fund is to have at least 3-8 months of expenses in your kitty. Building an emergency fund is one of the cardinal rules of financial planning. This way even if there is a job loss or pay cut you will have enough to cover your necessary expenses.
Additional Reading: To Have Or Not To Have An Emergency Fund
Health Insurance is a must
There’s never a better time to get that Health Insurance that you’ve been putting off for so long. Even if your employer provides Health Insurance, it’s always better to have your own Health Insurance. This is because the Health Insurance offered by your employer won’t be in effect in the event of a layoff/job loss.
In light of COVID-19, the government has directed all major general and standalone insurers to offer a basic, affordable and standard Health Insurance policy called Arogya Sanjeevani Health Insurance. This is a standard Health Insurance policy with uniform features across all insurance companies. The policy offers coverage between Rs. 1 lakh to Rs. 5 lakhs and is available in multiples of Rs. 50,000. If you don’t have an insurance policy, you can always opt for this since some insurance cover is better than having none at all. If you can afford it, then opt for an insurance policy with a higher cover than Rs. 5 lakhs. Healthcare costs are only going to go up in the future, so this should provide you with adequate cover.
Additional Reading: Arogya Sanjeevani Health Insurance Explained
Always good to have a second income
A sudden loss of income can throw your finances and future in jeopardy. Unfortunately, you can’t pause your monthly utility bills and other necessary expenses because of this. You will still need to pay them. This is where a second source of income will come in handy. It will help you meet these necessary expenses and tide over difficult times. An extra assignment over the weekend or a part-time job in the evenings after work are good ways to earn that extra buck.
Additional Reading: Top 3 Money Management Strategies For Those With An Irregular Income
Avoid equities if your goal is nearby
Investing in equities is a smart way to increase your wealth and plan for long-term goals like marriage, retirement etc. However, if your goal is only a couple of years away, it’s best to shift your investments to safer avenues that are not exposed to the vagaries of the market. When the market is on a high, equities deliver solid returns but in times like these when the markets are yet to recover from the debacle of COVID-19, it’s safer to move your investments. Otherwise you might be left short of your goal and years of disciplined investment may come to naught.
Additional Reading: How To Maintain A Proper Asset Allocation Between Debt And Equity
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