The pandemic has touched each one of us in some way or another. For many, it left some bitter experiences. Many even lost their jobs. They must have learnt the hard way about the importance of emergency funds. For others, the problems were not so voluminous. They couldn’t eat out, take vacations etc., which did leave them with some extra money. As life inches to normalcy, here’s a look at how we could reinvigorate our finances in a meaningful way:
1. Extra health cover:
Despite having health coverage through their employer, many people were dipping into their savings during the pandemic to settle their medical bills. It became apparent during the pandemic that it is essential to have extra health coverage for yourself and your family. This health cover can be completely customised to ensure that it aligns with your exact requirement.
2. Creating an emergency fund:
An emergency fund is always essential, which comes in handy during turbulent times. Typically, you should hold at least 3 – 6 months of household requirements in highly liquid avenues. Many people lost their jobs during the pandemic, and it was not easy to find another job within the 3-6month timeframe during Covid-19. This made it apparent that you should make a personalised assessment of the requirement based on your job security, job opportunities, income level etc.
You may create multiple layers of an emergency fund, such as 3 months in bank deposits, yet another 3-6 months in debt mutual funds and another 6 months’ worth of funds in balanced equity or large-cap funds, which can be exited in a phased manner based on your requirement.
3. Maintain a tighter household budget:
During the pandemic, many of the lifestyle expenses were limited. Eating out, socialising and vacations took a backseat. This resulted in more significant savings during the pandemic, which means that you will now be able to work with a tighter budget. As we return to normalcy, while you may be able to live a life based on your earlier lifestyle, you should continue to discipline yourself and ensure to set aside a more significant amount towards savings. This would not only result in better financial health but also enhanced wealth.
4. Efficient debt management:
The maximum number of defaults happened during the pandemic, as many people lost jobs or received a lower income. They were unable to cope with the EMIs and credit card bills. The cardinal mistake made by these individuals was they assumed debt without evaluating their repayment ability. As we return to normalcy, we can evaluate the outstanding debt and pay off the ones with a higher interest rate.
For example, if you have many credit cards, then you can choose to keep the ones with the best offers and surrender the others. Always remember to make timely payments for your credit card bills. Try not to have any EMI overlapping each other, and avail of loans one at a time.
5. Effective retirement planning:
Having seen the devastating effect of Covid – 19, we may have to reassess the quantum of corpus required for your retirement. It is all the more important to now ensure that you are adequately covered health-wise.
During the pandemic, senior citizens were severely affected due to their vulnerability. Many of them lacked health coverage, iterating the importance of health coverage. The corpus adjudged has to accommodate these unforeseen circumstances which may arise post-retirement.
6. Re-align your financial goals:
Just like we do medical check-ups every year, we have to set aside some time for a financial check-up and make necessary alterations to align the investment to the financial goals. This will also ensure that the corpus enumerated will suffice depending on the evolving situation. Health coverage and life coverage are important aspects that need to be revisited to ensure that you are adequately covered at all times.
These points ensure that you can reinvigorate your finances and get back on track after the intermediate setback in the form of the pandemic. Experts at TATA Capital Wealth can help you align your finances with your investment goals.