The Covid-19 pandemic has been a rude wakeup call for many to get their finances in order. Massive layoffs and depleting funds have forced people to ask crucial questions about their spending habits - a topic that barely cracked the list of top five priorities before the crisis.
Tough times are also great teachers as the pandemic has done what even expensive business programs can rarely do—get people to assess and make major changes to their spending, investing, and saving habits. What follows is a list
of money management lessons from the pandemic that are approved by
personal finance experts. So, here you go – the top 5 money management lessons that the COVID-19 pandemic taught us.
- The creation of a safety fund for a financial emergency
In a
PsychologyToday article, the author argues that setting up an emergency fund consisting of three to eight months’ worth of salary can act as a cushion in times of crisis. This is one of the foremost
money management lessons you need to remember
. - Save more, shop less
One of the
financial lessons that the pandemic has taught is that people would have been better off saving the money spent unnecessarily on shopping and travelling - the two discretionary spending causes that have fallen due to the pandemic.
Unless you control of your spending habits, you could end up in worse shape during the next crisis. It is a step in the right direction to create a monthly budget. And it is even better to make this a habit so that the rest of your earnings can be moved to a retirement fund.Getting rid of the credit card can go a long way in ending your compulsive shopping habits.
Also Read: Protecting your employees and business in a pandemic - Diversify your assets
While it is prudent to save, it is also necessary to have a disciplined investment plan that makes sense. It is also wise of diversify your portfolio considering the unpredictability of the stock market and changing interest rates in the
financial institutions.
It makes a lot of financial sense to divide your assets into a savings account, a stock portfolio, some gold, and a selection of mutual funds or other financial instruments such as bonds. This saves you from the volatility in one mode of investment, and at the same time, enables you to have funds available when you need it the most. Your needs will not wait till the market is stable. A portfolio diversified across gold, cash, debt instruments, and equity can yield a healthy return.
Also Read: Money Management Tips to Help You Sail Through Crises - Shielding your income
If the pandemic has taught us anything, it is that we are not invincible. Across the globe, many are watching their life savings melt away for reasons including healthcare and other expenses, and during a time when their salary is irregular or stopped altogether. Getting a life or health cover is easy. You can go online, look up what you need, answer a few questions, and the company will call you with a quote.
- Not accumulating debt
A lot has been said about the ill effects of having a credit card and its reckless usage. Outstanding credit card debt has grown alarmingly in India.Other forms of debt, such as housing loans and student loans, have emerged as a cause of major discomfort for people during the pandemic.
The lesson here is that paying off the loans and credit cards on time and avoiding them as much as possible, can turn out to be a blessing when crisis strikes.
Also Read: COVID 19 Economic Package: Implications For The MSME Sector Bottom-line Learning about finances the hard way is unpleasant, but doing so at least now can enable you to avoid
poor financial decisions in the future in case bigger calamity strike. Taking cues from the
crisis money guide elaborated above can help you reap a
personal benefit in terms of your finances in the long-term, taking you closer to financial freedom.
