November 21, 2023
How to maintain “Financial Health” during COVID-19
COVID-19 or Corona Virus making headlines around the world. It’s normal to feel uncertain about many aspects of life right now, including finances.
Let’s take a closer look at how you can keep your finances in order as the COVID-19 situation develops around the world.
Try to Save More
In the current situation, you are staying at home for weeks due to this pandemic. There are chances that you may be losing your regular income during this time if your employer is not offering paid leave or work from home facility is not available. Instead of getting panicked, focus on finding ways to stretch on saving your money. You may be wondering how?
There are few ways of doing so; cutting non-essential spending from your budget. Like, currently you are staying at home, you will be able to save money that you use to spend on transportation and eating outside food. I’m sure your weekend getaways are also locked down currently as you are entertaining yourselves at home through various online media that comes at bare minimum cost. You can consider this money in saving.
Emergency Fund
If your company allowing option of working from home, then consider boosting your emergency fund as you are having your regular income source is still flowing. So, it will be easier to resist the temptation of spending money on impulse buys like online shopping. Take this opportunity to increase your emergency savings (Keep at least 6 months of monthly expenses in Emergency funds).
Stick to Your Investment Plan
Due to COVID-19, there is increased volatility in the stock markets. It is creating anxiousness and in panic, we are tending towards selling our stocks / Equity Mutual Funds during this time of crisis. But believe me, that’s not a good option right now. In fact, choosing to sell your stocks now could result in a realized loss.
I know, it is difficult to watch the value of your portfolio going down and sitting idle of not doing anything to stop it. However, over the period equity markets will recover. Personally, I never planned on touching the money I have invested in the market until retirement. So, I’m not going to change that mindset and stick to the original plan for now. Instead, I plan to hold on for what looks like a wild ride ahead. I fully expect a bumpy ride, but I know that selling stocks for 20 to 30% loss is not the answer. But we can always re-evaluate our investment plan and make any changes if required with the help of Investment / Financial adviser. Important point to note here is don’t stop your SIPs. Instead if possible, increase the amount of SIP.
Take Advantage of Low Interest Rates
As the feeling of uncertainty is around the world, interest rates are dropping as well. If you have a good credit score, then you can likely take advantage of extremely low rates for all kinds of borrowing; especially housing loan.
If you have outstanding debt such as a housing mortgage or education loans, now is the time to refinance. You could potentially save thousands over the course of your loan. Although refinancing can involve quite a bit of paperwork. As you are at home you can easily do this task with comfort.
Moratorium on Loans (Home, Personal, Education, Car….)
Benefits of Home loan Moratorium
- Moratorium will reduce financial stress for those who are facing income uncertainty due to the COVID-19 crisis
- If you avail moratorium, it will be not be considered as default. So, your credit score will not get affected
- Banks will not charge any penalty for availing moratorium
Drawbacks of Home loan Moratorium
- First thing first, the moratorium is not a waiver. You will have to pay the EMIs later. Given that unpaid EMIs will be added to the principal amount, you will be required to pay a higher EMIs starting from July for the remainder of your loan tenure. This will put additional burden on you
- Opting for moratorium will have tax implications as well. The tax reduction which you avail on interest payments will be affected if moratorium is opted
- Deferring 3 to 4 EMIs could extend your loan tenure by 3 to 10 months depends on loan amount and tenure
- The interest payable on the loan will be higher when compared to the current interest amount
The Bottom Line
We are on edge due to the COVID-19 situation, but that doesn’t mean our finances need to suffer. Act to build your emergency fund before the virus impacts your finances. If your finances are already affected due to COVID-19 situation, take immediate steps to mitigate the long-term financial damage.
STAY HOME, STAY SAFE, STAY INVESTED
DISCLAIMER: Please do your homework and take the help of a qualified Financial Adviser before you take any financial decisions
