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Summary
- One should carefully plan his or her’s financial goals and create an emergency fund to survive a pandemic-like crisis.
- One should realise the importance of emergency funds, multiple income streams, health insurance, and others.
It is very difficult to gauge how the coronavirus pandemic has harmed us. People have faced many unseen challenges in the last 15 months like some have lost their family members, some have lost their jobs, some are facing hurdles in terms of reopening their businesses, while many are stuck at home without enough savings to sustain these tough times.
Of all these, there are a lot of personal finance lessons one should take into consideration for such uncertain times, whatever the economic outlook stands. Like one should realise the importance of emergency funds, multiple income streams, health insurance, and others.
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Here’s a quick guide of some financial learnings one should consider when in a crisis:
- Multiply your source of income: The pandemic has reconfirmed the importance of what Warren Buffett once had said that we should never rely on a single source of income and always create multiple sources to generate income. The key mantra to have financial success is to have multiple sources of income. You will be in a far better position to handle emergencies if you have other sources of income adding to your bank balance, which can give you some cushion in crises.
- Cut down your expenses: The job losses and pay cuts have made each one of us review our budgets and choose between needs and wants. The money should be spent wisely on the essentials required to survive. One should make a purchase decision considering all factors associated with that purchase. Prioritising your needs would help redirect the available resources in the best possible way.
Do read : What has the COVID-19 pandemic taught us?
- Avoid taking loans: Borrow as little as possible. Just because loans are readily available does not mean one should depend on them. Before proceeding with the loan, we should always try to cut down on expenses. Borrowing fund raises commitment that must be fulfilled in the near future, so do not borrow unless it is urgent.
- Diversify your assets: Covid-19 has disturbed all of us in distinct ways. The pandemic has had different effects on us. If all your wealth is invested in a single asset, then it is a cause of concern. Here comes portfolio diversification. In times of crises, financial and like the pandemic, the whole industry is impacted. Some sectors will do well while some wont. Like, oil prices fell to a record low, while the price of gold surged. So it is crucial to decide where all you can put in your investable cash, stocks, metals, cryptocurrencies, or others.
Also Read: 5 Gold stocks to focus on
- Do not speculate: The number of people investing in stock market has spiked recently. As the pandemic has increased working remotely, people have started putting their money into the stock market. Stock market value depends on many global as well as internal factors. Markets are highly volatile; always invest for the long-term to avoid fluctuations.
- Maintain liquidity:Usually, people save three months’ worth of expenses as cash in hand, but the pandemic taught us to increase our savings. Always create emergency funds for future use so that in times of crisis, you are prepared to pay for your expenses for a minimum of six months.
