With the further extension of the nation-wide lockdown to combat Coronavirus pandemic, uncertainty looms large over the economy and jobs. While it is causing some employers to rethink their hiring, others are delaying or cancelling increments and bonuses. 

Till clarity emerges, it is prudent to switch to a conservative personal finance management strategy.

1. Redraw your budget

First of all, your old budget might need to be reevaluated under the current circumstances. 

Some expenses – especially groceries – would have seen a spike, due to stocking-up or increase in its prices. Also, spending on hand-sanitisers, masks and fruits & vegetables are likely to remain high, till threat abates. On the other hand, working-from-home also means negligible spending on transportation, eat-outs or movie tickets. 

Similarly, there could be alterations to your income or cash flows – from a delay or a temporary cut in salary payment.

A person should redraw their budget based on new realities and try to live within one’s means. Buy what is absolutely necessary, while delaying any big purchases (say white goods, car or house) till the overall situation improves. 

2. Pad up

If you end up saving more than the usual, pad up your emergency fund. It should be at least equivalent to six months of your household expenses. Invest in a good-performing liquid fund to build it up. 

An emergency fund will temporarily help you sail through a pay cut or a job loss. 

3. Shun Debt

Repay all your credit card dues on time. Paying only the minimum amount or asking for a temporary reprieve could entail a huge interest (about 40 per cent per annum) on the outstanding. Similarly, continue to pay your EMIs on home or car loans as usual. 

If you are unable to make ends meet, call your creditors, who could be your landlord or the mortgage company and explain your financial situation to them. Inform them promptly about a pay cut or a job loss and by letting them know the steps you are taking to tackle it. It’s better to communicate than ignore the problem. 

Stock markets are highly volatile over the short-term. Therefore, invest in equities with a long-term perspective of at least seven years.  If you are short of cash, consider selling your debt investments instead.

4. Don’t Panic

Patience is a virtue when it comes to investing. Don’t sell your equity holding to improve your liquidity. It will convert paper losses into reality without leaving any scope for your portfolio to recover its losses. 

Stock markets are highly volatile over the short-term. Therefore, invest in equities with a long-term perspective of at least seven years.  If you are short of cash, consider selling your debt investments instead.

5. Use the Opportunity

Till recently, you might have outsourced most routine work – be it house cleaning, cooking, painting and sundry – pressured by time. However, during this lock-down, you forcibly did many of them. It’s likely that in the process you might have picked up some practical skills – be it to cook, clean or fix things.

When the crisis melts away, you can make permanent changes to your lifestyle. Your expensive visits to eat-outs could occasionally give away to healthy home-cooked meals. 

These small steps will go a long way in helping you save more and accelerate your progress towards your retirement and other financial goals. 

Takeaway

With present times warranting us to exercise caution, it is best to switch to the conserve mode. By living within your means and padding up your emergency fund, you can prepare for any eventuality.