Covid-19 has affected the economy badly, so has it impacted the personal financial priorities of most of us. Many businesses and industries are unable to operate at their fullest capacity. Similarly, the salaried class has witnessed loss of jobs or huge pay cuts. Now is the time to rethink and reform our budgets and scrutinize income vs expenses to be stable enough to cope with the current situation and be able to manage them reasonably in future as well.
How well you manage to balance your funds at present matters a lot. Here are some tips to help you do it right:
Curtail your expenses-People cannot live a normal life now. There is always a fear that the necessary things will not be available if movement is restricted due to lockdown. The recourse that has been often resorted to is panic buying and hoarding of essentials. However, despite the availability of all the things to live life smoothly, and assurances given by the government, people are unnecessarily stressing their budgets by investing in panic driven shopping. Avoid paying for expenses in advance due to fear of unavailability of goods and supplies. Make sure you make a budget and follow it. As the income levels have gone down, reflect it in your expenses and investment pattern to reduce them proportionately.
Balance your debt against your income-Do not indulge in any debt that endangers your peace of mind in current times. Also, the things will take some time to stabilize, until then it is advisable to keep the debts at minimum levels against your income. The future is not certain and if you think you will be able to overcome the gap between your income and debt, it would be a highly risky and unrealistic decision, looking at what the situation taught us so far in last one year. A low debt-income ratio is preferable.
Smart borrowing strategies-To meet short-term requirements you like to try the lending apps which are gaining popularity lately. Just be cautious to choose only those which are legal and registered with the Reserve Bank of India. The registered lending companies are monitored by the RBI guidelines. They need to adhere to a code of conduct. Fraudulent lending apps will lend you in trouble if you fall prey to them.
Liquidity, a must– Under all circumstances, liquidity should be maintained to meet the day-to-day expenses and other obligations arising out of emergencies. Develop a habit to keep a certain amount invested into a liquid fund. Keep aside your emergency fund safely into a savings account. As and when the need arises, only cash or other liquid investments can be useful. When liquidity is compromised, one needs to break the fixed and long term funds to take care of the crisis and hence should be avoided.
A little care and monitoring of your finances can relieve you to a larger extent than certainly not giving any prior thought to it. It does not need a very big deal to take a quick look at your budget, finances, plans. If there is a proper track of the income and expenses, it will be easier to make the necessary changes to face the challenging time. An alert mind and a strategic approach will help you get through it.
Bhoi Smrutirekha Dharanidhar