NEW DELHI :
Managing money can be a daunting task. A financial plan can help you to be on track and to lay down a road map for you to achieve your goals. The second wave of covid has resulted in another series of lockdowns to contain the pandemic. The ongoing crisis in the country is making us question whether our personal finances are aligned to deal with such situations. Against the backdrop of these unprecedented circumstances, let us look at some ways of managing money in such situation in detail:
Emergency fund: Given how uncertain the times are, you can no longer afford to exhaust your monthly income without saving anything for the future.
“One thing the current crisis has taught us is the importance of an emergency fund that will help you last at least three to six months. It means you should have enough money to be able to pay for your basic living expenses, including food, rent and monthly utility bills,” said Ilica Chauhan, vice-president, PC Financial.
Insurance: Another important aspect is to have health and life insurance plans. The pandemic has also highlighted the need for health insurance, which offers broad coverage.
Good credit score: It is advisable to build and maintain a good credit score as it is the need of the hour. “In an emergency, when you need cash, a credit score can help you get pre-approved loans,” said Chauhan.
It is important to understand the relevance of credit scores and have knowledge of lenders who forgive these credit scores.
Enough liquidity: In case of liquidity crunch, and especially in situations such as the one we are facing now, it isn’t feasible to completely depend on others for financial support. Hence, individuals must invest their money in such mediums or instruments that can be easily liquidated when required. When you begin budgeting, keep aside a certain amount that you may need if a situation such as a lockdown recurs.
Debt to income ratio: In addition to spending on groceries, electricity and water bills, etc., some people also spend their incomes on finances such as home loans, car loans, and equated monthly instalments (EMIs). “Since current times are unpredictable, it is vital to maintain a healthy debt-to-income ratio with your current income and not necessarily splurge on the basis of future earning potential,” said Chauhan.
As crisis situations are unpredictable, one can never be fully prepared for them, but following these small steps can help survive difficult times.
Never miss a story! Stay connected and informed with Mint.
our App Now!!