COVID & Personal Finance

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COVID’s Impact on global economy is still not estimated. Expert opinions range from a short term impact on global supply and spends to 2+ years of recession.

Job losses are mounting , pay cuts have begun, Food supplies are becoming costlier and Banks are reducing interest rates on deposits .

Weather it is a longer situation or will be resolved in 3 months , no one knows but it does raises concerns on well being of the family, finances and Funds to be ensured. One should utilize this time of quarantines and shelter at homes on reviewing and possibly fixing the financial setup. Here are a few suggestions to get you rolling :

Credit cards:

We all carry multiple credit cards . While these are super convenient and most of us can not imagine living in today’s world with out them, They are also one of the biggest reason for impulse shopping, Over spending, funds leakage in late fee and subscriptions that we never have time to discontinue. Here are few suggestions on what do on credit cards while you are at home and spending most of your time on Netflix..

  1. If you have multiple cards , limit all your transactions to just one card. This will help you identify auto-debits active across other cards .
  2. Download card statements for last 3 months for each card you own and list out All expenses on subscriptions, late fee payments, interest charges, Restaurant bills and other recreation bills. These are called discretionary spends
  3. More likely that you will find that you not using many of the subscriptions . Most of late payment fee could have been avoided if you had made minimum payments in time .
  4. make minimum payments immediately and re-look at all the subscriptions and shutdown the ones you do not use or can do away for 3 months
  5. then compare the remaining expenses with Post COVID expenses. The differences will be an eye opener. Except for medical, food and supplies , rest of the expenses could have been avoided in past. Look at changing your habits for future . This does not really mean you become a monk but more aware of expenses.

Essentially the goal should be to limit total discretionary spends to 5 to 10% of your monthly earnings. This equation will help you balance the finances a great deal. and what better chance to force yourself to change your spending pattern than a forced stay at home situation

Bank Accounts and Funds:

Over a lifetime of working and living we end up accumulating a lot of bank accounts, pension accounts and electronic wallets . Most of us never have time to revisit them. When at home, you have the opportunity to do the same. here are some suggestions:

  1. consolidate all the bank accounts – regular and electronic.
  2. Look at the latest statements and identify any idle funds lying in lesser used accounts
  3. Move all the Money to your main account and Put them on Fixed deposits immediately.
  4. Contact the bank to close the accounts that you not use. This will keep your funds in line of sight, stop any monthly and other fee that banks charge for ATM cards etc.
  5. Reduce the chances of frauds and get your money in one place and Liquid, lest you need it in immediate future.
  6. Ideal setup will be to have 3 accounts
    1. One account for living expenses, card bills
    2. One Joint account with spouse for Children
    3. One account for building corpus for retirement savings and Investment . 30% of your net worth of minimum 6 month of living expenses should be parked in this account.

Being aware of economic situation and Planning for the same helps dealing with panic and stress. Keeps family happy and gives you strength to deal with any possible disruption in regular income.

Insurance Policies

These are most important part of keeping your financial planning robust but are also the most ignored aspects. I will update this article in coming days on basic tips on health, term and Family insurances

We wil also discuss a bit on Stock market and Mutual funds and various means to invest and park money

The views expressed are my own and am no financial expert. if you follow the advise above , please do so on your risk.

One thought on “COVID & Personal Finance

  • April 7, 2020 at 10:22 pm
    Permalink

    Well written but more specifics will be helpful

    Reply

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