COVID impact-Changes required in your personal finance -
Investing, Insurance, Estate Planning and Managing loans
COVID-19 erupted around 1.5 years ago and it isn’t settling not only in India but Globally. The devastation it has given to mankind, the impact would be felt for a long time. The effect would also be felt in many areas of personal finance which would change the way we all have been managing our finances till now. The longer this pandemic lasts, the pain of all business houses except a few would increase and in return for employees and vendors associated with them. 4 important aspects of personal finance should change so as to absorb the impact of the pandemic way forward:
The crisis of the pandemic has highlighted the importance of asset allocation in the investment strategy. The impact of Covid19 has led to the loss of lives of bread earners, affected businesses, loss of jobs, salary cuts, and much more which has made many realize the savings which couldn’t come to rescue in crisis are worthless. Many, who were asset rich and liquidity poor, have understood the importance of liquidity in their investment portfolio. Real Estate, traditional insurances, FMPs, and any investment where the portfolio is heavyweight in such assets which are illiquid have hit hard many who have seen the crisis in this period. Thus shift in portfolio further to design so as the liquidity remains while the portfolio as a whole gives post-tax returns to beat inflation.
Both life and Health insurance have been found grossly underinsured as the unfortunate situation has risen in the family.
Life insurance- The families who have lost their bread earners experienced the crisis for gross negligence of not having a decent cover for the family to manage their lives further. Term Plan is a right solution which should be a decent Sum Assured which needs to be examined to give compline in case of eventually.
Health Cover- Families have caught themselves in a situation where either the terms or the sum assured were not conducive to take care of the hefty bills of Hospitalization.
The old Generation plans where restrictions in room rent charges, consumables not covered had to pay the heavy amount as bills ran in lakhs. Secondly, low Sum Assured has also hit hard where the treatment cost for COVID19 has been extremely expensive. Thus a reality check should be done sooner than later for your policy to understand the importance of high sum assured and convert your policy into new generation plans.
An aspect many have been ignoring all their life as it’s normally given priority at old age but Covid19 2nd wave has articulated a fact that death is uncertain and unknown to everyone. The wave has hit many youngsters especially the middle-aged who have left many complexities for the family to handle in the absence of a Will. Thus family should engage an expert for estate planning of the family that certainly includes both husband and wife.
Like western countries, Indians have also started getting used to loans which could be for buying computers, white goods, vacations, mobiles, etc other than for cars and homes. The comfort of paying monthly EMIs to raise the living standard has hit many really hard. Thus, it is not prudent to depend on the loans to create an artificial living standard and one should restrict to the affordable level of monthly installments. It’s time to restructure your cash flows, gauge all EMIs based on the present inflows, and should you require break some investments it would wise to do so. And we all have to realize the support western countries give to their citizens in crisis we in the developing country can’t expect the same.
The above are the significant aspects of personal finance that should be relooked in midst of a pandemic as the crisis hasn’t ended and the cumulative effect will certainly be harder to bear for a long time. It is imperative to do a reality check of all habits that have got disturbed during the pandemic and it is time to change all that effectively.
“Any kind of crisis can be good. It wakes you up.” - Ryan Reynold