From waiting in long, never-ending queues with our Debit Cards, to how to manage life without money, the entire demonetisation episode taught us many a life lesson. Out of what we’ve learnt so far, let’s take a look at what demonetisation has taught us about managing our personal finances:
Additional Reading: Demonetisation: The Good, The Bad, And The Downright Hilarious
Take Budgeting Seriously
You don’t need to wait for a crisis to tell you that you need to budget and spend your hard-earned money wisely. Financial experts across the world have been pinpointing the importance of budgeting for years now. Basically, budgeting is the foundation of every sound financial plan.
The recent demonetisation wave showed us people being forced to re-consider their high-priority expenses before their discretionary expenses. You’ve probably seen people stocking up on groceries instead of spending time at the movies, right? With the restricted cash flow, everyone was taking care of their bills, Investments and other critical expenses while completely avoiding any frivolous purchases.
Budgeting and prioritising your expenses will pave the way for financial freedom. You’ll be able to achieve your financial goals only if you learn to budget yourself well.
Additional Reading: 4 Possible Leaks In Your Budget
You know what people with copious amounts of money lying about at home faced during the recent demonetisation bout, right? Still think it’s a good idea to stuff piles of money in your cupboard locker or under your mattress?
Yes, you’re probably saving it for a rainy day. And we do agree that financial emergencies require you to have at least three to six months of living expenses within easy reach. But, it is better to keep this amount invested in easily-accessible avenues such as a short-term Fixed Deposits, short-term Debt Funds or Savings Accounts.
Here’s another reason why it isn’t a great idea to stash money at home – you’re sabotaging its value! In a few years, inflation will reduce its purchasing power. On the other hand, if you invest your money, you can see it grow exponentially thanks to the high returns investing provides. Maybe it’s time to park your money in investments instead of hiding it within the four walls of your house.
Additional Reading: Investments For Young Professionals
Don’t Take Erratic Decisions
During any crisis situation, our first reaction is panic. We’re only human after all. A lot of people panicked after the unexpected demonetisation announcement made on the 8th of November. A high percentage of the masses were seen rushing to buy jewellery in an effort to offload their Rs. 500 and Rs. 1,000 denomination notes. The demonetisation wave also piqued people’s interest in long-term bonds and debt funds.
But, if you have already been investing according to your portfolio, does it make sense to change your asset allocation just because of a crisis situation? Well, the answer is NO! Asset allocation depends on a variety of factors – your age, your present financial situation, your risk appetite, your goals and their timelines, etc. While it makes perfect sense to rebalance your portfolio periodically, it is not something you should do when you are facing a short-term sticky situation (we’re referring to the demonetisation episode).
Additional Reading: Introduction To Debt Funds
Don’t Ignore Technology
Most of us would have sailed through smoothly if we had kept pace with the technological advancements in the financial world. Though banks have been pushing services such as mobile banking and online banking for a while, we didn’t seem to give them too much importance back then. Digital wallets (such as Paytm) faced the same cold shoulder as well.
But what happened after demonetisation was announced? People were frantically downloading payment apps, applying for their Debit Card PIN numbers, applying for Credit Cards, setting up their netbanking accounts and looking for other payment avenues. On the other hand, people who were already using these services didn’t face too much trouble even though hard cash wasn’t available.
Bonus Read: Time To Go Cashless!
Gift Your Kids A Piggy Bank
Well, this is one key takeaway from the demonetisation episode. It’s wise to gift your kids a piggy bank along with monthly pocket money to fill it up with. During the recent cash crunch, children with piggy banks who were given pocket money proved to be a blessing for their parents. The loose change made it easier for parents to tide over situations where they were strapped for cash. Of course, this meagre sum of money wouldn’t have helped all that much if the crisis was bigger, but it did help with the situation at hand to a fair extent.
In addition to being a boon for you as a parent, the practice of giving your kids pocket money helps to build the habit of saving in them. As a result, they’ll grow up to be financially disciplined adults.
Additional Reading: 14 Money-Saving Hacks For Students
While the recent demonetisation and cash crunch waves left large sections of the population high and dry, we can still take some positives out of the entire scenario, especially if we consider the important lessons we’ve learnt about managing our personal finances.