It is absolutely pertinent to feel rattled right now. The COVID-19 outbreak has resulted in turbulence in the global economy with unprecedented city lock-downs, quarantines, and volatile markets. The sudden market swings have left many individuals questioning the state of their finances.
Taking care of our health to prevent the spread of the Covid-19 virus has become paramount. However, it is important to make readjustments in our personal finances to take on any difficult situation.
Try to remain calm during these times, seek assistance from professionals before making any big financial decisions.
Top Ways To Prepare For A Personal Financial Crisis
Enhance Your Emergency Fund
The impact of coronavirus pandemic could be long-term repercussions of the recent volatility. In such a scenario, an emergency fund will come to your rescue, if there’s any loss of income in the near future. At present, there’s some skepticism about health insurance policies covering pandemic treatment. If your insurer refuses to cover a coronavirus related treatment as it has now been declared a pandemic, your emergency fund will be something you can rely on. Ultimately, having sufficient funds will keep down your dependence on borrowed funds during a critical situation.
Go Digital to Repay Loan EMIs
If you are paying any sort of loans or EMIs in an offline mode, you need to quickly move to the online mode. As you might be unable to pay your EMIs if your bank shuts down due to the outbreak which can result in late fees or loan default. The best option to overcome this hurdle is to set an auto-debit mandate of EMIs from your bank account to avoid repayment delay. In addition, RBI governor Shaktikanta Das requested banks to increase digital transactions amidst the Covid-19 crisis. If you face any difficulty in repayment of EMIs, you may contact your bank immediately to request an extension in the loan tenure so that the EMI level may come down.
Reconsider Your Budget
If you think current conditions could impact your finances, consider tightening your budget. Making a budget and sticking to it is a sound strategy at any time, especially when your finances may take an unplanned hit. Adding more money into an emergency fund is one budgeting move that could help you weather income uncertainty during this time.
Review of Health Policy
Most of the health insurance policies cover the COVID-19 treatment costs involving hospitalization. This was only until the coronavirus was not widely known as a pandemic. But ever since it was announced pandemic, policies that exclude pandemic coverage may not settle claims arising from such cases.
According to media reports, the IRDAI has requested health insurance companies to extend coverage to Covid19 hospitalization cases in their policies. As such, ensure you go through your health insurance policy document to get complete clarity on its list of coverage, you should also check for any latest intimation from your insurer.
Reconsider Your Investments
It’s an ideal time to take stocks of your investments to rebalance your funds if it's anamorphic towards equity or debt assets.
Moreover, risk-averse investors can increase their investments in risk-free instruments like PPF and NPS. Also, you need to assure investment decisions strictly based on your financial goals, risk appetite, and liquidity requirements. When in doubt, consult your financial advisor and don’t pay heed to rumors.
Don’t Refrain From Long-Term Investments in a Rage
As markets are going through a volatile phase, many individuals might discontinue their long-term investments in a huff. Instead, you need to continue with your mutual fund SIPs to meet your long-term financial goals.
SIPs provide investors the benefit of rupee cost averaging to devour the shocks of market volatility and fetch desired returns. Moreover, in the distorted market buying more mutual funds at a discounted price could be beneficial. You could gain higher returns when the markets bounce back. However, the longer you invest, the better would be your chances to get desired returns.
A crisis like this demands calm nerves. So, avoid panic and follow the instructions declared by the authorities, especially those concerning hygiene and social distancing. Similarly, keep calm and make necessary preparations to boost your personal finances. The more disciplined you are, the better it is for your health and wealth.