How to deal with your personal finance concerns in such uncertain times?
The shutdown or suspension of business activity in numerous organizations, ranging from small and medium enterprises (MSMEs) to larger corporations, has created severe economic disruptions as a result of the lockdowns implemented to prevent the spread of Covid-19 infection. As a result, many people face financial hardship as a result of a job loss or wage reduction, with some even losing their whole salary check.
In order to manage one’s finances during such unpredictable times, one needs adhere to the most basic financial planning principles.
Building an emergency fund is the first step in dealing with such a catastrophe. Is it necessary to preserve sufficient quantities in liquid form for at least six months? Cash, a savings account, a breakable fixed deposit (FD), a liquid/short-term fund, and so on? so that the person may go through a crisis without too much difficulty
Insurance is the most crucial tool for protecting one’s finances from unanticipated events. Individuals should purchase life insurance to cover their financially dependent family members, as well as health insurance to safeguard their funds in the event of a significant financial burden during hospitalization.
A person may need to take out a loan if they do not have enough emergency savings or insurance coverage. Maintaining a good credit score will help you secure a loan with a reduced interest rate. This requires prompt payback of outstanding debts and credit card balances, among other things. Aside from a loan, a credit line can be used to assure quick access to funds up to a predetermined level.
The current low-interest environment may tempt you to use credit to purchase long-term assets such as vehicles, air conditioning, and other movable assets, as well as immovable assets such as real estate. Taking out a long-term loan, on the other hand, binds you to spend future earnings to repay the loan. Financial difficulty is exacerbated when incomes are lost due to situations such as the Covid epidemic. To minimize future financial difficulties, it is therefore preferable to avoid making unneeded purchases on credit.