COVID-19 is a now a worldwide pandemic. While India has had relatively fewer infections, cases are expected to explode over the next few weeks. While most of us are working from home due to a lockdown, if things get really worse, the economy will suffer and many of us might be staring at situations like job losses or reduced income.
While nobody knows how long this will last or how much we will be affected, there are a few money lessons to be learnt.
An emergency fund is crucial
Since the rest of the year and perhaps more will be really bad times for the economy and earnings, an emergency fund is crucial. As the thumb rule goes, you need to save the bare minimum that you need to survive every month. In fact, building an emergency fund is the first thing one needs to do in financial planning, even before one starts investing. If there is a pay cut, a delay in salary or a job loss, an emergency fund can help you tide through the difficult times.
Health insurance is a must
If you do not have health insurance or are not adequately covered, this is a wake-up call. And it is not just COVID-19. Any sort of health emergency can burn a hole in one’s pocket and in such times can spell financial disaster. Even if you employee provides you health insurance, you should have a private health insurance. When considering the premiums, one can get adequate yearly health insurance cover for the price of a few dinners.
If your goal is nearby, avoid equities
When the stock markets are performing well, equities deliver very high returns. This might tempt one to stay invested in equities even when a goal is near, say a couple of years away. However, one should always shift one’s investment to safer avenues when one is about to be achieved. Otherwise in times like this when the markets are yet to witness significant correction, one might be left short of a goal and years of disciplined investment may come to naught.
It is important to find a second source of income
A second source of income always comes in handy, especially during difficult times. While it will not be easy to take up additional work with a regular job, assignments over weekends or some home-based work can lead to an extra income.
Tough times do not last; but tough people do. In times such as these, let’s try our best to remain optimistic and positive. This too shall pass.