Covid-19 is an unexpected crisis and it has changed everything, including the economy. Here are some simple tips on how to manage finances during Covid-19.
It’s a strange time to be alive. When this year and decade dawned, little did we know that we’d all be sitting inside our homes for several weeks, while many people were getting sick and dying around the world. However, that is the reality today and we have to accept it.
The Coronavirus hasn’t just affected our physical and mental health, it is also affecting our financial health in a big way. The economy has taken a big hit, and global economic experts are predicting a major recession, probably bad enough to be called a depression.
Okay, so that is depressing news, but how does it affect each of us personally? On an individual level, the pandemic has already affected us in many ways. On one hand we are saving money on outings, shopping, daycare and fuel, but on the other hand we are facing a lot of uncertainty. With lakhs of business on the verge of closing down, many jobs will be lost, and many of us may experience a cut in our paychecks.
If you are a person who employs other people, even if its a cook, maid or gardener, you have their pay to think about. At a time like this, many of us are paying them even if they can’t come to work, since this is probably their only way to feed their kids.
With so many changes happening fast, it can feel scary to think about our finances, especially when thinking about the future. But the fact is that even if the global economic scenario may appear bleak and will take some time to settle down, a few steps from our end can help us tide over this difficult period without too much pain. What’s more, having our finances in order along with a plan for the future will cut down on a lot of stress. Stress is always bad, but it’s particularly bad during this time, when it can affect your immunity!
So to help you have a sense of control in this uncertain time, we’ve put together some tips on how to manage your finances during Covid-19. These are quite basic and don’t require the help of a finance expert – all it needs is a healthy money mindset and a positive attitude to make things work.
How to Manage Finances during COVID-19
1. Review your Budget
If you’ve already got a budget in place, this should be easy. If not, start making one right away.
The first thing to do is to check all your income sources and current financial situation. Start by looking at all your bank accounts and seeing how much cash you have on hand. Note down separately the accounts from which you can withdraw cash immediately. Ideally, you should have an emergency fund with about 3-6 months’ worth of living expenses saved up.
After your income, it’s time to look at expenses.Again,if you’ve already got a budget, this is done for you. Sort them into essential and non-essential categories. Essential expenses will include:
- Housing – rent, home loan payments
- Utilities – electricity, water, phone
- Groceries – food, toiletries and cleaners
- Medical – doctor visits, essential medicines
- Insurance payments – life, medical, car
- Loan payments – student loan, car loan, personal loan, credit card debt
Now, you need to check if your emergency fund or liquid funds will help cover your expenses in every scenario. Anything could happen over the next few months – you may lose your job, your salary be see a 30-40% cut, you may get too sick to work. Consider if you’ll be able to mange in all these scenarios. Of course, there is also the best-case scenario where your income doesn’t change, and you actually save some money because of the lockdown.
It’s time to create an emergency budget. This will be different from your usual household budget, since there are a few expenses which have come down significantly, like fuel or payments for outsourced tasks like ironing or gardening. On the other hand, you may have to pay more for your internet pack since you’re working from home now. Consider all these and you have a new budget to stick to.
2. Look at your Loans
Loan payments can take a good chunk out of our incomes so it’s important to look at whatever outstanding loans you have at this point. Some banks are making it easier to delay home loan payments, so you need to check with your bank if they are offering a similar facility. Landlords may be willing to delay rent payments, but considering that you’ll have to pay it all up at some point, it doesn’t make much sense to not pay rent now unless you’re in a serious financial crunch.
When it comes to personal or car loans, many banks are offering deferment on EMIs, but this depends upon your bank. Financial experts recommend against taking a moratorium, unless you have absolutely no money to pay. You can also consider shifting your loan to a bank offering a cheaper interest rate, as long as there are no hidden fees.
If you have outstanding credit card bill, it’s best to not let it accumulate, since interest on credit card bills can be quite high. If you can, pay it all off now. If you can’t, pay at least the minimum amount so you don’t end up with fines.
3. Revisit your Insurance Policies
Most Indians have some kind of life insurance, and if you’re among them, you must be glad you took one! However, if you’ve just been mindlessly paying the premiums without checking the terms of the policy, now’s the time to look at the policy in detail.
See how much coverage you have and how much of your family’s expenses it would cover. Check if the policy takes care of your family’s living costs as well as your child’s education. Most insurance companies are working during this time, so if you have any doubts, you can contact them over phone or email. You may also want to move to a policy that offers more coverage in case of any eventuality.
This is also a good time to look at your medical insurance. What does it say about epidemics? Some hospitals are being converted to specialized Covid centres, so see what other hospitals offer cashless hospitalization at this point, should the need occur. Be sure to ask your parents to check on their medical policies too.
4. Trim down Daily Expenses
Even before the lockdown started, people across the country were panic buying and stocking up on groceries. This is not at all needed, since the government has repeatedly assured us that the food supply chain will not be affected. That said, it’s a good idea to avoid going to the stores frequently, so you can stock up on a few non perishable groceries so you’re not stepping outside and exposing yourself unnecessarily.
The first thing to do is make a meal plan for the entire week, and a matching grocery list. When doing this, consider the supplies you already have so they can be used up before you buy anything new. Make sure your fridge and pantry is well organized, so everything is visible and nothing gets wasted or expired.
Cutting down on meat can save some money off your grocery bill. Avoid buying processed foods – not only are they expensive, they’re bad for your health. Skip exotic ingredients like goji berries and buy local produce. Walk to your nearest store to save fuel. Choose local brands or supermarket brands over more expensive ones.
As for personal care, you might not find your usual brands at this time, so go for others. DIY self care is always a good option, and this way you can avoid unnecessary chemicals as well. You can easily make homemade face packs and hair packs for extra nourishment without side effects.
Check if you have subscribed to magazines or other services which you can do without, and cancel them right away. This is also a good time to check if you have initiated any auto-pay features towards any sinking fund accounts. You can put a pause on these for the time being so you have more liquid funds at your disposal. Wherever possible, use cash back apps or payment options so you get more bang for your buck.
5. Don’t Forget Entertainment
With all of us restricted to our homes, we are spending a lot of time online. A report by the Broadcast Audience Research Council (BARC) says that users are spending 12% more time on streaming platforms now compared to before the lockdown and viewing time has also increased by more than 50%.
During these times of stress and uncertainty, entertainment is no longer a frivolous expense. It helps lighten the mood and moves our focus from harsh realities. That said, you should be wise about the kind of entertainment you’re having, so you’re not overspending in this area. Don’t forget that there are manyways to keep kids busy, including making fun foods for them.
With all sporting events being cancelled, you may no longer need the sports channel. You also need just a couple of reliable news channels, the rest can be done away with. Inform your cable operator about these changes, so you get a lower cable bill. Check out the streaming services like Amazon Prime, Disney+Hotstar, Netflix, Voot, MX Player Online, Sony Liv and Zee5. Go through their plans and their content and choose the ones that best suit your family’s interests.
6. Make use of Freebies
Ever since the pandemic started, several companies and brands have begun offering their courses for free. There is a lot of free content available, particularly for kids, including videos, courses and worksheets you can print at home. This also works as an alternative for mindless entertainment.
If you’ve always wanted to learn a new skill but didn’t have the time or money for a class, now’s the perfect time. From languages to yoga to photography, you can learn anything you want from home, and for free. Many popular companies are offering their own courses – for example, Nikon has a free photography course right now.
Khan Academy, Udemy, Skillshare, Yale, Coursera, Edx are all offering a variety of courses that you can use to brush up your job skills and make you more relevant in the job market. While you’re at it, don’t forget to use this time to update your resume and your LinkedIn profile, as well as your job description on any website.
7. Consider Ways to Make Money
There are two main ways to ensure you maintain your financial situation – you can either save money or make more money. However, if you’re smart, you’ll do both! While you learn new skills for your job and cut down on unnecessary expenses, you can also explore ways to make some extra money on the side.
This is the ideal opportunity to start your side hustle, or at least do the homework so you can be ready to take it off the ground when the time comes. If your plan includes making physical products, it may be difficult due to the unavailability of raw materials, but you can at least work on marketing and brainstorm new products. If you have a good internet connection, there are many other jobs you can try.
Over the long term, you can consider other options like renting a part of your house as an Airbnb or for paying guest. Or you could move to your parents and in-laws’ place for a while during which you can rent your own home, if it’s feasible for all parties involved.
8. Be Careful with Stocks
Watching the news can be anxiety-inducing, especially if you’re watching the markets. Stocks have been falling and investors are getting antsy about what to do. However, experts warn that this may not be a good time to sell, since you may end up incurring losses. The expectation is that the market will stabilize eventually, and your stocks will value more then.
However, if you’re in a serious financial crunch and need money, you can go ahead and sell your stocks – after all that’s more important. If you don’t have any current financial issues and your job is relatively stable, some people with a better risk appetite may prefer to buy some stocks while they’re low.
On an average, it’s best to stay put when it comes to stocks, since the market is quite volatile and the overall feeling of anxiety can lead to some bad choices. Avoid following a day by day update of the market – it makes no sense at this stage, other than increasing worry.
9. Learn from the Crisis
Last but not least, this pandemic is a great learning opportunity for all of us, albeit with different lessons for each one of us. Being under lockdown has taught us the importance of having a budget, keeping track of expenses as well as having multiple sources of income. More than anything else, it has taught us the importance of having an emergency fund with a few months’ living expenses put away. We’ve also realized the significance of life and medical insurance, for every member of the family.
This is also the time many of us are making wish lists of places to visit and things to do. Having a bucket list like this helps you plan for your goals and estimate how much you need to save to make them come true. If financial matters have always been a matter of uneasiness for you, this is the time to reset your money mindset and focus on abundance instead of scarcity.
If you’ve always had another dream career in mind or wanted to work from home, this is your test run. See how you like it, and if you seriously miss your day job. Thinking about these matters will help you realize what you really want in life.