How To Manage Your Personal Finances During COVID-19 Pandemic
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COVID-19 has spread across the globe and claimed thousands of lives. Uncertainty in markets, the declining economy, and rising unemployment have created restlessness in public. The world over stock markets has tumbled more than they did during the Great Recession and stocks across industries have fallen, making equity investors lose money. Lakhs of businesses have been closed due to a lack of workers and loss of demand. 

These unprecedented times have led to concerns about the future and fear of restricted income. 

However, there is a way to overcome the current crisis. To tide over these difficult times, individuals and families can take a few steps to manage their budgets sensibly. Though COVID-19 will continue to have a negative impact globally, a few smart decisions may help common people maintain healthy finances.

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Re-evaluate your budget

Every well-managed household works on a pre-decided budget. Usually, budget changes with changes in household income. Due to the uncertainty plaguing income, drastic measures may need to be adopted to ensure that expenses do not increase. 

Households need to re-evaluate their budgets and sort expenses as per relevance. They need to demarcate between necessary and luxury items and take a decision to forego the latter for the time being. It is crucial for households to take this decision for financial stability until the threat abates.

It will be ideal for households to toss out frivolous expenses and spend money only on essential items and services. Unessential expenses could be those on entertainment, gourmet meals, and fashion.

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Save for rainy day

It is always advisable to have savings and an emergency fund. This fund can provide a cushion in trying times such as these. Households should immediately start creating such funds once the epidemic is over so that they are ready for any hardships in the future.

Do not ignore credit card payments 

With most shops and businesses closed, it seems an odd time to worry about making credit card payments, but it is not. Do not delay your credit card payments even during an economic full stop. Credit cards charge a high rate of interest on pending payments and directly affect your credit score. Hence, if there is a liquidity crunch, at least the minimum payments must be paid to avoid exacerbated bills later. 

Other bills such as electricity and gas should be paid even in the lockdown period as they are essential expenses. This will ensure a lack of interest on delayed payments that worsen the cash crunch.

Stock up but do not splurge 

The lockdowns have made stocking up critical. However, hoarding and overspending on groceries is not a good idea. While it is wise to avoid supermarkets and crowded places, just buying enough supplies for a month should suffice. Governments across geographies are ensuring that there is no restriction on the flow of critical items and hence their availability will not be an issue. Efforts are being made to restart online grocery delivery everywhere as well. 

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Avoid panic selling

The freefall in global stock markets is making investors uneasy. As portfolios tumble, there is a strong impulse to sell stocks and minimise losses, but this is the worst possible course of action. By selling equities at a lower price, paper losses become real. The value of most stocks will stabilise when normalcy returns. By selling shares, investors will only monetise their losses. Hence, they should hold out and wait for the volatility to end.

Following these few simple tips can help households weather the current storm and emerge from it unharmed. More importantly, when things get back to normal, they will find themselves in a stronger position with no extra liabilities. Furthermore, some of this advice can be helpful even in stable times.

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The author is the Associate Vice President - Financial Services, Aranca

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