What Has The Pandemic Taught You This Time?

Published by Sharekhan Education | April 9, 2021

What Has The Pandemic Taught You This Time?

And you thought the pandemic was over. Thousands, no lakhs have been affected this time. Just when you thought that the worst was over; Covid-19 jumped back with double vigour and started its deadly massacre once again. Just like our Bollywood films isn’t it. The hero takes a battering for some time and just when the bad man feels that he has done away with the hero what happens? The hero strikes back and wins. That is exactly what needs to be done with the pandemic. The hero is taking a battering, the war is on. Right now the bad-man; the virus has an upper hand but just like in the movies the hero will win, remember? We shall turn the tables on the virus soon. We all just need to take a strong grip of the situation and blast the virus away.

Money Lessons:

The first wave of the pandemic did teach all some wise money lessons. You learnt to respect and care for your money, your health and your families; but of course the hard way. But what has the pandemic’s second wave taught you?

Importance of Emergency Funds:

The second wave made one thing very clear that emergencies can strike at the blink of an eye again and again and again. This strengthens the need for having an emergency fund in place. Looking at the current situation you could ramp up the emergency reserves to double. Most financial experts generally advise maintaining an emergency fund equal to about 3 to 6 months of living expenses. This means that if your monthly expenses are Rs. 50,000, you should have an emergency fund of Rs. 1.5 lakhs to Rs. 3 lakhs to cover basic needs. But the situation is very different now isn’t it? With lockdowns affecting normal functioning of businesses we are looking at surge in prices of various commodities and living essentials. How then can the old formula suffice? Besides don’t you need to factor in the out of pocket expenses for medical treatments just in case the virus decides to knock your doors? So to effectively manage these needs in times of emergencies you need to at least double the amount that you have been keeping aside. So if you were aiming at maintaining an emergency reserve of say Rs. three lakhs you will now have to double that amount. This will probably prove helpful in times as such.

Building emergency fund:

Looking at current financial conditions you may say that it’s a steep number for you to achieve. But do remember that Rome was not built in a day. To help overcome financial stress in times of emergencies as this you need to take one step at a time. Starting now is the best thing that you can do. This can prove useful for any future emergencies; you don’t know how long the pandemic will last do you? So, if you lack an emergency fund, begin building one now. Being prepared is always beneficial. However, to address immediate monetary needs, you can utilize funds earmarked for other goals, but ensure to replenish them once the emergency has passed.

Life Insurance lessons:

Any kind of an emergency situation which has associated threat to life clearly brings to mind the importance of life insurance. The pandemic has also prompted us to realize the importance of adequately insuring our lives and health. Life is a onetime offer, if you don’t use it well, not you but your family will suffer in your absence. So many seemingly fit and fine individuals have lost their lives this time, it is thus important to take adequate life cover to support ones family in times of such crisis. It is time to review your insurance portfolio, select the right policy and supplement the cover you hold. Generally a thumb rule is to take a cover equivalent to 10 to 25 times your annual income. Check if you have adequate cover based on this, if not supplement it with the right plan. A low cost term plan can be useful here.

While on the health front you are aware of the rising costs and out of the pocket expenses incurred for treatment against Covid-19 virus. To assist everyone, insurance companies have introduced Corona-specific policies. These are short term and useful policies. Explore if you need one.

Savings and Investing habit:

The first wave of this pandemic taught you the biggest lesson in frugality; to live within your means. A concept forgotten was rekindled leaving most individuals with a decent surplus they never knew they had. Resulting in an increase in household savings and investing. This was quite evident by the growth in mutual fund AUMs and the all-time high achieved by the stock market. As the second wave has hit before you could revert to your old spending habits hopefully you will continue to live within your means and continue to channel the surplus into savings and investing, won’t you?

Conclusion:

To wrap it up we can say that this second wave is a wakeup call to gear up and enhance your financial security and make adequate provisions for you and your families. Together we can and we will win this war against Corona, so do continueto wear your masks, wash your hands and keep a safe distance from others. And don’t forget to boost your immunity with healthy diet and regular exercises.

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