“Financial wellness means freedom from financial stress and debt, peaceful life, and being prepared for emergencies.”
Worried about the COVID 19 cases rising ? It reminds us about the ghost of 2020 taking away employment and restricting movements. However, this time we are slightly better prepared due to the ongoing vaccination drive and increased awareness about the virus.
Major cities across India have taken steps to curb movements and started imposing partial lockdowns and night curfews to control the spread of the virus, which will have an impact on the economy and the stock markets. The reflection of rising cases can also be seen in stock markets behaviour, markets have started correcting themselves from the peaks created earlier this year and may continue to trade with volatility.
These factors would definitely have an impact on your finances. Here are some ways to plan your finances –
a)More savings
Lockdowns and work from home have definitely resulted in low expenses both personal and household. The office travel and office expenses are gone, even the school fees have dropped in many cities which is definitely adding up in your bank account. The net savings would be higher than what you would have saved under normal circumstances. These savings won’t last if you don’t make better use of them. Needless to remind you that, a lot of services and amenities would become expensive as the demand would increase and business would ramp up the prices to make up for the lost time. It would be wise to increase saving and not spend unnecessarily on discretionary expenses.
b)Beat inflation
An added advantage of work from home is more savings but during the past year, inflation has also increased whereas the interest in bank savings account and fixed deposits have shrunk. Fuel prices are not going down soon, which makes a lot of services expensive. If the high inflation remains and the interest rate does not increase ( expected to be lower), then all your hard work would become redundant. You should park your savings somewhere which can beat inflation. The FD’s and RD’s are not going to help, you should explore debt funds to park your savings which can help you stay ahead of the inflation rate.
c)Diversification
After the fearful Q1 of 2020, the markets showed a sudden surge and reached new highs. Who would have expected that Sensex would breach the 50,000 marks during this phase? The investors who were still holding their equity position stuck gold and earned a lot of profit. Their patience during the first Quarter paid off well. But this ride would face disruption and volatility. Looking at the situations a lot of investors would like to pull out their funds which could result in the market dropping down. The equity market indeed shot up during this period but it remained volatile throughout. In such volatile markets, diversification helps in mitigating the risk of sudden falls. Diversifying the investments towards debt and gold would definitely help to manage the risk in the market. It did help during the phase where Nifty was down by 30% where the debts instruments and gold were giving double-digit returns.
d)Delay big decision
Due to better savings, we tend to get ambitious with the savings and try to take a big financial decision. One such decision is to buy a home. Houses have become cheaper as the demand dropped. And with better savings, one may think that the monthly EMI will be manageable. This phenomenon could be short-lived hence it is better to avoid such a hasty decision. The uncertain job market is one more concern, keeping this also in mind it is better to delay the big decisions & be better prepared. Saving more does not harm and some patience would be better than restlessness of spending the money in taking long-term commitment based decisions.
While the uncertainty may continue to persist in 2021, on the positive side, you should prepare yourself better this time as we are aware of the consequences and we have seen this movie before.
