Financial Management in an Uncontained Pandemic
- May 2, 2020
- Posted by: Anshul Shukla
- Category: Finance
Faced with a global pandemic which is causing an unprecedented crisis, it has cost us heavily not just in terms of human capital but also financial. The fires of economic turmoil continue to rage as industries across all sectors lie crippled and helpless. Fueled by plummeting demand caused by the forced lockdown, US crude oil prices treaded on dangerous ground of the negative territory on 20th April 2020. (minus $37.63 / barrel) The first time ever in history!
Stock market tips may not seem to work for you as investor sentiments seem ever-changing. The financial market volatility continues to remain high thus exposing investors and traders to high risk. Some of our favorite stocks listed on the Bombay Stock Exchange & National Stock Exchange have cliff-jumped as the world collectively stays behind closed doors to flatten the Covid-19 curve.
Can we do something to shield ourselves from the inevitable economic downturn?
If you’ve been procrastinating your money matters but been meaning to do them for a while, now is the time to put them in order. Here are 5 things to keep you afloat through the crisis:
- Check your insurance coverage:
In these uncertain times, your priority numero uno must be insurance coverage. The most dreaded rain check being ‘are you adequately covered’? It is paramount that you have a health and life cover for yourself and your family. If you do not have one, GET IT NOW! If you do, check the coverage period and make sure you’re covered through the pandemic. Banking upon the group policy generally provided by your employer is not sufficient and it is recommended that to you get personal cover to some extent for every member. It is critical that the coverage amount be enough to cover the family.
- Scrutinize your expenses & savings in case things get worse:
Surviving through a pandemic driven recession is especially stressful in lieu of the already triggered job slashes and pay cuts. The future holds no certainty about the performance of your current employer, and it is pragmatic to prepare for what may transpire next.
“Prudence is the necessary ingredient in all the virtues, without which they degenerate into folly and excess.” says a quote on Forbes. As a thumb rule, it is good to have 6 months’ worth of essential expenses in a secured fund on hand for exactly such contingencies. List out your essentials and strike off the discretionary expenses.
- Investing during these times:
If your essential expenses are taken care of and you’re privileged enough to still be left with a surplus, turn your head to the long term. Instead of keeping the money idle, it’s advisable to let your portfolio expand if you can absorb the market volatility for a little more while.
Financial markets have eroded the wealth of several mutual fund and equity investors lately. The Bombay Stock Exchange and National Stock Exchange, albeit highly volatile still remain a safer bet when placed against debt. Research calls for restraint when considering dumping equity for debt, like discontinuing mutual fund SIPs altogether.
The Franklin Mutual Fund fiasco reveals that the debt space is not so safe either. If the current situation does not see a hiatus, we could be seeing multiple defaults from corporate FD, Non-convertible debentures, etc. which could wreak further havoc in the debt space. A simple stock market tip – a good mix of assets in your portfolio is a good way to hedge volatility risk.
- Review your financial documents & re-strategize:
Reviewing financial documents kills two birds with one stone – it achieves consolidation and digitization. Moving all essential financial documents in one place ensures a healthy maintenance of financial assets and avoids a frenzied situation later. All paper transactions can be eliminated and moved online in this extra time for better consolidation.
A review will also help you be cognizant of your current financial capacity and help you rework your financial plan for the near future. A comparative analysis of what went well in the past and what didn’t is a great way to avoid mistakes and re-strategize. Moreover, the reduced clutter will help alleviate the current stress.
- Get banking and tax-related activities in order:
With banks depending upon a reduced workforce for their functioning, net banking currently is the best way to manage your finances. The tax regime announced in the current budget will help you make your own calculations to decide your personal tax regime and inform your employer accordingly.
If your tax savings depend upon your investments that are still pending, the finance minister has allowed you to do it by 30th of June this year. It also includes provisions to link your Aadhar and PAN cards in case those are pending too.
Dr. Daniel Crosby, a New York Times bestselling author, in his book The Laws of Wealth – Psychology and the Secret to Investing Success” says Trouble Is Opportunity. Don’t let this trouble get in your way.
Voracious reading regimes coupled with a penchant for writing led me away from a glamorous yet mundane corporate career. When nobody's calling, the mountains always are - you'll invariably find me atop one.