Building financial immunity during the pandemic


August 6, 2020

Ever since the beginning of the COVID-19 outbreak, there’s been a gush of information about preventative measures one must adhere to, to remain safe. They are all simple and effective ways to keep the virus at bay. Something even children can follow with ease. One of the important do’s on that list being, building the immune system to stay strong. One’s immunity indeed plays a vital role here as that is what helps to keep the body’s natural defences up and fight any viruses, bacteria and parasites daily without severe complications. However, when we fail to properly take control of our systems, these natural defences weaken over time. The same analogy can be applied to our financial planning. Let us see how.

Very often these days, we come across this phrase, “We are all in this together.”. Yes, we most definitely are. The pandemic is very much an emergency, a critical one at that which the whole world is facing. It came unannounced. Nobody ever imagined what a blow this would be and nobody still knows how long it’s going to last or how much more damage it’s going to cause. Phew! We have our fingers crossed and hope no more. But the one thing that stands out is that while we are in this together, we are not in the same boat. Each one of us is in a different boat flowing through the same turbulent river. Some of us have lost our jobs, some of us are operating under pay cuts, some of us have lost loved ones and some others still have everything intact but are living fearfully every passing day. We’ve somehow adapted to all the new ways forced upon us by nature since the last six months.

As much as we’d like to have everything back in our control much sooner than one can imagine, there are still a whole lot of questions yet to be answered. However, there are some which need to be brought to the fore and spoken about just as openly as the other preventative measures. Building financial immunity is just that and equally important as maintaining physical immunity. Having an emergency fund is a marker of that among many other things. As we find ways to navigate through this crisis, the question on almost everyone’s mind has been how to ensure financial security for their family. There are two important approaches to think of – short term and long term. Short term would  involve your day-to-day affairs and long term would apply to investments made for different goals still  many years away.

Short term

  • Re-assess your budget If anything, the pandemic has made us all realize that we don’t need much to live a happy life. We can actually live well on the very basic and re-evaluate our needs vs. our wants. With restrictions on outings and travelling, we can re-jig our monthly budgets to allot a sufficient amount to necessities, be very mindful with our spending and ensure we save for a rainy day.
  • Don’t ignore your emergency The first point about saving for a rainy day brings us to continue working on that emergency fund. Now, more than ever given that the emergency has actually struck or may be looming around in one form or the other. You’re probably making use of it depending on your current situation. But if not, it’s important to keep maintaining it for any unforeseen circumstances.
  • Be practical about your helper It’s hard enough to work from home that we also have to take care of the cooking and cleaning of our house. Not having our regular helpers for extended periods of time isn’t easy on anyone. Whether to start letting them in or wait till things get better, is another confusing question. Paying them their salaries on time without actually having the services rendered is also not a feasible option for many in these times. But if it does come to that, paying them at least half their salaries (if not full), can be a temporary solution instead of letting them go completely. And if that too doesn’t seem like an option, at least pay them a small token amount to keep them afloat for a short period of time.
  • Beware of coronavirus scams Cyber crimes under the name of coronavirus are a threat in these times. Even if you decide to donate or invest somewhere with good intentions, ensure that the source is credible. Do your research, ask around, don’t transfer any money through unknown links directing you to enter your bank account/credit card details without having checked if the money is going to an authentic party.

Long term

  • Staying invested As far as possible, it’s best not to disturb any investments intended for the long term to accomplish bigger financial goals. The market is volatile and you may not be comfortable looking at prices of stocks crashing. But withdrawing your money now because of this fear might turn out to be an impulsive decision especially if you try to buy back when the market recovers. The prices are prone to be higher then. Seeking advice from your financial planning adviser is highly recommended if staying invested is not an option for you.
  • Re-balancing your portfolio If at all the first point isn’t viable for you, it would be beneficial to consider re-balancing your portfolio before you make any drastic decisions. Again, consulting your financial planning adviser could give you a clearer perspective and help you plan better. The role of diversification or asset allocation can’t be emphasized upon more than in the current times. Hence, it’s best to ensure that re-balancing involves a good mix of various investments.
  • Insurance is a must Life and health insurance should both be non-negotiable. After all, health and finances are tied in so closely. It would be unwise to not have these insurance policies in place. In fact, getting a critical illness insurance policy would provide a bigger safety net by staying one step ahead, in case of any unforeseen circumstances.
  • Pay attention to your retirement account In the midst of everything that you’re trying to set right in these times, it’s possible that you might ignore your retirement account. Ensure that you don’t do that. It’s also important that you do your best to not disturb that either if cash flow is an issue currently. A retirement account should not be mistaken for an emergency fund. Therefore, do you best to not quit it or exhaust it either.

The last several months have been testing times for each one of us. With the new normal, multitasking is redefined and anxiety levels have been at their peak. But we’ve got to remember that there are a few things that are still under our control. Taking good care of ourselves and being responsible citizens is of course, the most important one. And being cautious with our finances, understanding the do’s and dont’s about money management in these unprecedented times is even more crucial to tide through this pandemic. Safety, to a large extent today lends itself to being financially immune too. A positive mindset is another one not to be forgotten in this list. Whatever boat we might be sailing in, we will get through this together.

Stay safe!

Nisha Neurgaonkar

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