Personal Finance Trends in Covid Times: How you can save, invest and spend better

The biggest threat a person can have in life is the loss of regular income. The pandemic has shown us everything from people losing their jobs to total business closures. We are suddenly witnessing a choppy new era where employees are content with big pay cuts, while business houses from big conglomerates to small businesses face an incredible deadlock.

Household savings, on the other hand, have seen a huge increase since the country went into quarantine mode. Whether you’re a miser or a money-burning machine, the foreclosure has kept everyone from spending anything beyond the basics. Everyone’s expenses were reduced to rent, salaries, EMI and basic necessities. While this may sound good to people who have been successful in surviving their business or keeping their jobs; but it would mean a bloodbath for businesses that depend on consumer demand. If you think the effect will end there, then you are seriously wrong! It will eventually come down to our jobs! Because it will directly affect the ability of these companies to pay wages and create jobs as they grow, creating a downward spiral.

On the investment side, a lot of money has turned to the stock market this year as the market has seen an astonishing V-shaped rocket rally; while the interest rates offered by the banks continued to fall. Surplus households kept their money in the bank to cope with uncertainties, while those with enough wealth to explore investment opportunities made sure to take advantage of the market downturn.

While many people have a tough attitude to investing, the disruption caused by Covid-19 can serve as a red flag for others to boost their finances.

4 strategies to get you ready for the next pandemic:

Increase the percentage of savings

I understand we all want to live a flamboyant lifestyle, but a pandemic of this magnitude has forced us to hold on to a little more than what we use too. As we will eventually restore all of the extra expenses we had before the outbreak such as vacations, shopping, parties, etc., it is essential to remember that there is no insurance that a catastrophe will be. of this magnitude will not strike us again. Therefore, spend it wisely.

Diversification

We have seen with our own eyes that in this pandemic nothing seemed certain, from a private bank seizing savings to financing closed houses on the collapsing stock market, demonstrating that no financial product is risk-free, it’s just different forms of risk. The epidemic has reminded us that our money has no safe haven. The point is, every investment comes with some risk, and you need to determine which dangers you are willing to accept. The amount of money you invest in each asset should be determined by the level of risk you are willing to accept, not the actual return it generates.

Emergency fund

A pandemic is unlikely to occur on a regular basis, but its occurrence is always possible, so we should have an emergency reserve of at least three months of spending. The main argument here is what if we lose our jobs or our business goes bankrupt? As a result, this emergency money will come in handy when you are looking for a new job.

Never panic in heavy fixes and use it

When investments become more volatile, investors may be tempted to sell because they may perceive that things could get worse. And, we saw exactly that the market initially fell like pinball machines in March 2020, Nifty50 went from 12,400 to 7,700. But today, in less than 18 months, it hits an incredible high of 18,000 Only investors with the necessary risk-taking capacity, both financially and emotionally, can cope with such volatility. In fact, any responsible and informed investor should seize this opportunity to invest if they have the means.

We may forget the Covid epidemic in a few years. It can be referred to with relief rather than fear. Even the financial lessons learned can be forgotten and we can revert to past behaviors. However, I’m sure many of us might change our behavior when we remember the faces of famous people who had to deal with nights without jobs and homelessness because of the disaster. This is how crises work. It’s like wounds, it leaves a scar that never fades! And the scar here is FEAR!

(By Sahen Karamchandani, Certified Wealth Manager)