Money Mantra For 2021: How Covid Prepared Us To Tackle Financial Woes

As we approach the end of this year, here are financial lessons that investors should derive to tackle the woes

2021 has remained a difficult period for all of us, thanks to pandemic. With businesses taking severe hit, the year has left many jobless with people struggling to make ends meet. As we approach the end of this year, let us look at how 2020 impacted our financial lives and the lessons that investors should derive from these changes. Health insurance is a must The ongoing health pandemic has forced us to rethink our financial strategies especially when it comes to taking an adequate health cover. Before the pandemic has striked us, people were not considering a health policy seriously and relied only on the group insurance cover from their employers. Remember the group insurance cover may not be applicable after you lose job. You need to buy health insurance cover on your own. People have witnessed the hospitalization bills of many covid-19 patients running up to lakhs of rupees. It is important to get a higher cover of at least Rs 10-15 lakh. Never ignore term cover The pandemic has wrecked havoc in our lives and left scars for many with families losing their loved ones due to Covid-19. There have been cases where the family witnessed loss of its breadwinner because of the infection. Even though pure protection term plans can be seen as a waste of money because there’s no maturity benefit but these low-cost policies are extremely important to ensure you have a life insurance cover. Keep an emergency fund As a result of job losses due to businesses being badly impacted by Covid-19, those with financial burden such as mortgage payments and loans have seen the worst times of all. However, the RBI announced a moratorium in May, which provided some relief to borrowers. One such lesson for everyone is to maintain an emergency fund. SO make sure you have enough money in a liquid fund or a bank deposit that can be readily available. The rule of thumb is to have an availability of at least 5-6 months’ expenses or up to a year. Revisit your household budget  This entire year made us realise the importance of financial planning and reviewing our budgets. As the pay cheque got affected and in some cases given a pink slip, many households tried to live on less money. Even though the economy is on the way to recovery, there is an uncertain future with mutated strains of virus originating in UK. You need to avoid unnecessary expenses and only spend as per the requirement of the household instead of fulfilling your wants or desires. Also don’t rely on future income You should deter from making any plans based on your future income unless there is any certainty. If you have made any plans of big-ticket expenses relying on the increment or hike, then better reconsider your decision. Most salaried people, who usually get a raise in the April-June quarter, were devoid of any hikes this year. With incomes going down this year, it is ideal to reconsider your goals according to your present income.