Personal finance 2021: Top moments & learnings

Much has changed this year. In terms of personal finance, the year has been rich in lessons; more so because of the second wave of Covid-19 which devastated lives across the country. The year has taught everyone the importance of being in control of their personal finances.

The year also offered individuals several new opportunities to increase their wealth. After the damage from the second wave of the pandemic, came a bull market like never before.

Here’s a look at some of the best personal finance moments and lessons of 2021 you should know before heading into 2022.

Health and insurance policy awareness

Having life coverage with term insurance is one of the surest ways to secure your family’s financial future. Experts believe it is important to purchase term insurance at an early age to avoid high premiums. It is also important to have adequate health insurance coverage (including for the family) which could come in handy during an emergency hospitalization.

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“During the surge of cases in the first and second waves of the pandemic, many families had no choice but to use the savings earmarked for education, marriage and other major expenses on household bills. ‘hospital. It made people realize the importance of Medicare. It is now an element of personal finance; before the pandemic, it was mainly used as a tax saving strategy, ”Ajinkya Kulkarni, co-founder of Wint Wealth, told FE Online.

Living with Covid-19: Keeping the contingency fund ready

Despite the Delta wave in the first half of the year, the country remained open for most of the year. As we move into 2022, the new Omicron variant comes with increasing risk. The pandemic can end in one of two ways, either we reach ‘zero Covid-19’ or the disease becomes a continuing part of the infectious disease.

Experts say companies will have to adapt to live alongside Covid-19. Therefore, for every personal finance plan, having a contingency fund ready for emergency purposes is a necessity now more than ever.

Volatile markets: hang in there, diversify your investments

As markets have corrected themselves from peaking and losses begin to loom, it becomes difficult to avoid making the emotional decision to cut those losses. This mistake can be detrimental to long-term wealth creation.

“Your first defense against these mistakes is to create a diversified portfolio across different asset classes that match your investment horizon and your risk tolerance. During times of market volatility, when your risky investments – stocks (domestic / global) may fall, the overall performance of the portfolio may not be so badly affected. A diversified portfolio of complementary assets helps you smooth returns in times of volatility and mitigate portfolio risk, ”Kumarpal Jain, assistant vice president of digital wealth platform Fintso, told FE Online.

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Increase in investable surplus for individual investors

With the economy regaining some sense of normalcy, 2021 saw the end of wage cuts in most industries.

“Equipped with working from home and recurring blockages, the common man faced an unusual situation: passive excess savings and limited spending possibilities. In 2021, the participation of the retail trade has grown at an exponential rate, the continued bullish wave in the market is proof of that, ”Kulkarni said.

Demat accounts have doubled in the past 3 years

Much of the flow of this further increase in investing surplus has seen its presence in the stock market. According to a recent report from SEBI, the number of Demat account holders has more than doubled in the past three years, reaching 7.38 crore as of October 31. a ratio of approximately 76,510: 1.

RBI opens sovereign debt market

The government has launched the RBI Retail Direct Gilt Account which allows retail investors to invest directly in government bonds.

“Allowing retail investors to set up accounts directly with the RBI rather than through a bank and providing a free service is a laudable move by the central bank. G-sec were previously only available to retail investors through traditional insurance plans or mutual funds. The program has garnered a lot of attention from NRIs as they have found it to be a good secured debt option.

Avoid speculative bets; working for long term wealth

Some of the cryptocurrencies have seen a dramatic increase in value in 2021, giving many people a FOMO (Fear Of Missing Out). The temptation to build wealth in such a short time has led many people to consider investing in these digital currencies.

However, experts say it’s important to understand that cryptocurrencies are very volatile.

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“Bitcoin, the leading cryptocurrency by market cap, hit an all-time high of $ 68,990 and shortly thereafter experienced a dramatic drop of around 32%, hitting a low of $ 46,584. In addition, some of these Digital currencies are very vulnerable to government regulations and social media tweets. We believe it is in the best interest of investors to avoid such speculative bets and focus on their long-term wealth creation plan by completing their investments when they can, ”Jain said.

Borrow intelligently

According to recent data released by the RBI, the total value of credit card transactions exceeded Rs lakh crore in October 2021. Banks charge around 2.5-3.5% per month if you haven’t paid it. ‘full amount unpaid. So, in case you have an overdue amount pending, your priority should be to pay your credit card bills.

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“However, not all types of debt are bad. Money borrowed to buy a home or a student loan can help you build long-term assets. The goal should be to borrow what is really needed and as little as possible, ”Jain said.