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Recalculating your personal cashflows during these difficult times

For many of us recalculating cash flows has become a reality. If you haven’t done it yet, then do sit down and undertake this critical task of recalculating your cash flows. Here is what you need to keep in mind.

This extraordinary global health and economic crisis have had a direct impact on individual cash flows. Whether you derive income from your business or a salaried job, it's more than likely that many of you have to sit and recalculate cash flows today. 

At an extreme, you may be looking at a job loss, zero business income with expenses continuing or at a minimum, you are looking at a financial year with no annual bonus to look forward to. 

For many of us recalculating cash flows has become a reality. If you haven’t done it yet, then do sit down and undertake this critical task of recalculating your cash flows. Here is what you need to keep in mind. 

1. Calculate expenses for the next year

First write down all your household expenses, interest and monthly repayments and regular investments for the next 12 months. This will help you arrive at a consolidated figure of cash outflow for each month. Other annual items like school fees and insurance premiums are really non-negotiable and hence, don’t need to be recalculated. 

Similarly, your monthly loan repayments are non-negotiable as not paying on time will land you with a tarnished credit history and will have the bank chasing you. The loan repayment moratorium announced by the RBI may or may not be relevant to you, hence, we are not taking that into account here. 

With all expenses and cash outflows written down, consider the ones you can reduce. Maybe try to bring down the monthly credit card bills, gymnasium and spa expenses or even the monthly saving towards a travel budget. Find your pockets of saving and enhance those to have a positive impact on your cash flow for the rest of the year. 

2. Keep your investment cash flow going as much as possible

What you set aside for your long-term investments ideally should be changed only as a last resort. Unless you are in dire need with no other avenue, do not stop your regular investment into long term assets. This is also a cash outflow and it can just as easily be stopped. However, stopping this will leave you with a big hole in your future finances. For now, focus on taming your current expenses rather than the investment required for the future. 

Find your pockets of saving and enhance those to have a positive impact on your cash flow for the rest of the year. 

3. Replan big expenses 

If you had any large expenditures planned for later in the year; that vacation to Australia, or that house purchase which was pencilled in for the month of Diwali, you may want to think about erasing them out. Given the impact on business income and a sure slowdown in take-home salary, you may want to replan your large expenditures. 

This means deferring that international vacation to next year and leaving property purchases for when you have adequate savings. Pushing the large expenses down the road will free up cash flow for now and help you tide over this difficult period. You can get back to those choices once inflows get regularised and back on the growth trajectory. 

One can choose to wait and watch for the next two months or have a plan B in place. This is unchartered territory and requires an equally out of the box approach to your finances going forward. For now, keep focusing on your cash flows to ensure that you continue to save and invest for your future without disrupting your present lifestyle more than is necessary. 

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