Once the lock-down ends, it will still take few months for our life to become normal. Further, this experience will enrich us with lots of learning to cope up with any such situation in future. Lets list down few leanings we must take form current situation to manage our personal finance:
- Create emergency fund :
Few financial planner suggest to create emergency fund equal to 12 months expanses if the family has single earning member and 6 months expenses for family with 2 or more earning members. If you do not have any emergency fund till now, we know its not easy to create such hugh amount. Its always better to break the target into small parts. To start with you can keep target to create the emergency fund equal to 3 months expenses. Once that is achieved, create another fund for to cover 3 months.
Where to keep this emergency fund: Consider bank FD, liquid fund or short term funds to keep your emergency fund.
- Revisit monthly expanses to start saving:
Wondering from where will money come to start creating this fund ? Well Corona has already thought us that. How much was your spending during lock-down period ? If you compare it against spending for a month during non lock-down period, you will realize where not to spend. I am not asking you to completely cut down on your non essential expenses. But you can surely make your own calculation and make target for monthly saving amount. Remember till the time you are creating your emergency fund, you must consider saving very aggressively.
Indians consider saving as Monthly income minus expanses. This is time to challenge this formula and reverse the same:
Income – saving = expanses.
Once we calculate our budget and make target for monthly saving, put that amount in your saving kitty on the day you get salary each month and start all expanses after that. This small change in habit will ensure you grow your savings faster.
- Have adequate health insurance:
Indians look at Insurance as a tax saving tool. This is time to rethink about our health insurance need. For a family of four, it is recommended to have floater health cover for minimum apount of Rs 5 lac. While with increasing age, this value can be upgraded once in every 4 to 5 years. Many of us also rely on health cover provided by office. However, this is to note that in case of job loss or resignation, office health cover also gets terminated. So it is important to have separate health cover even if your office is providing the same.
- Do not disturb retirement corpus :
According to WHO, average life expectancy in India is around 69 years. If you are maintaining healthy lifestyle, the same is expected to further go up by around a decade. Retirement age is about 58 to 60 years in the country. This means we are expected to live more than a decade or two after retirement. Do not withdraw from your provident fund or pension plan to meet current needs. This corpus is going to help you in your post retirement life when your salary income will become zero and on the other hand medical expanses might see an increase.
While saying or listing down these learning looks easy, it will actually take us changing our habits to actually implement the same.
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