The ongoing COVID19 pandemic has had some far-reaching effects on the economy. Personal finance took the biggest hit at an individual level, with instances of job cuts, slashed salaries, and activation of loan moratoriums being reported across the country. It is also something that rarely gets discussed because everyone has a different setting and no one-size-fits-all solution.
But now that the economy is slowly recovering itself, it is time to tweak your finances. It would help if you created a plan that gives you more power with your wealth as you try to stabilize your financial resources and affairs. Here’s a quick guide to help you get started.
This is the first thing to ask yourself. Has the pandemic affected you? If yes, in what way?
If your finances have been affected – either through a job loss or a medical emergency – you should list those specific changes. This can exhaust your liquid fund, a sum borrowed from a friend, or a lapse in paying an installment.
A list of affected areas of your finances will prepare you for the type and degree of the changes you will need.
Status of existing and ongoing Investments
The next step is to assess your savings and investments. Barring the excess money (against your monthly average) that you have spent (to get through the pandemic so far) and the shortage you may have, how does your profile look? Did a job loss or a pay cut affect any of your investments? If yes, in what way?
Answers to these questions will help you plan your next steps.
Tweaking your finances – Two-Pronged Approach
You can start with two things:
Having an emergency fund is essential, so start by recreating or refilling it. The pandemic is not yet over, and you may need to dip into it again in the future. So, please keep it to the brim, or maybe even increase it.
Next, you should focus on replacing existing investment instruments with ones where you can earn a higher interest rate. Stocks, sovereign gold bonds (SGB), and mutual funds are great options to invest your money for long term benefits.
Utilize mutual funds and other instruments with high interest
Investing in mutual funds is a good investment avenue, but the risk of market volatility deters many. Therefore, putting some of your money in mutual funds is a great way to sail through this pandemic carefree.
A better financial plan means better decisions and better resolutions that are tailored to support you on rainy days. Recreating an emergency fund and investing in mutual funds are two potential ways to stabilize your finances. Use the following Wealth Builder Calculator to plan your investment strategy smartly. Or consult your financial advisor to help you out.