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The unprecedented Covid-19 pandemic has had a severe impact on the entire world. It triggered health and financial crises that took a toll on most of the people.
Lakhs of people lost their job and many others faced pay cuts in their salary. Businesses are also facing the major setback. Every adversity also teaches us some key lessons. The most important lessons that we learn from coronavirus crisis is to manage personal finances properly.
Important Financial Lessons that COVID-19 Taught Us
Let’s go through some of the most important financial lessons you should learn from coronavirus crisis.
- Build an Emergency Fund
- Don’t take unnecessary debt
- Diversify investments
- Insurance cover is must
- Get an alternate source of income
Build an Emergency Fund
People usually invest or spend, and don’t save. In the ongoing crisis situation, you need to maintain an emergency fund that can help pay your EMIs and bills even when you lose the job.
Having an emergency fund helps meet your regular expenses during the times of financial crisis. You must maintain fund that can cover at least 8 to 12 months of your family’s expenses. Also, you must ensure that such fund should be easily available as cash, when required. You are advised to use it only during financial emergency.
Don’t take Unnecessary Debt
People often take too much of debt to fulfil their family’s financial needs. However, it’s essential to consider the payback capacity before taking any debt. Taking debt will only create a pain point during economic crisis, when you are not able to payback its interest that will further increase your financial liabilities.
Diversify Investments
Don’t put all your investments in only one asset category. When you are investing your hard-earned money, you must diversify investments across varying asset categories such as equity, debt, bonds, commodities, property, etc. This move not only helps to reduce risk but also optimize your investment returns. While choosing financial instruments, you need to consider financial goals and investment duration.
You can also pick some safe investment options such as Public Provident Fund, and National Savings Certificate that ensure guaranteed returns, help to build wealth and achieve financial goals.
Insurance Cover is Must
Life comes with several uncertainties and you need to keep yourself prepared against any uncertainties. To ensure complete financial security for the family, you must invest to buy a life insurance plan. It provides financial stability to your family, if something unfortunate happen to the earning member of the family.
You must also get an adequate health insurance coverage, so it can cover any healthcare-related expenses incurred for your entire family. By getting a suitable health cover, you need not to pay medical bills from your pocket and help you manage personal finances effectively.
Get an Alternate Source of Income
Considering the present uncertain economic scenario, it’s quite essential to get an alternate source of income. It becomes quite helpful in case you lost the job or looking for some extra income. You can opt for some freelance work, part-time jobs etc., that can prove extremely helpful in managing finances during financial crisis.
Conclusion
Managing your personal finances is always important. You need to align your income, savings, investments and expenses with the family’s short and long-term financial goals. In an uncertain global economic environment that caused due to Covid-19 crisis, it’s vital to get yourself prepared for emergencies.
A proper financial planning helps you manage finances in a better manner even in the crisis situation. You need to revise your financial plan and make changes to fit with the changing needs of your family.