A new normal for your finances

Last Updated : 17 May 2020, 17:16 IST

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The New Normal is here. Even the biggest cynic has had to change their lifestyle due to the pandemic.

It is amazing how much our life has changed over the last couple of months.

The crisis has also had a positive change by making us realize what is more important to us in our life. And that hopefully also includes our finances.

With the extra time on your hands, it is certainly a good time to have a look at how you can make a real difference in your financial security, not just for your peace of mind but to be resilient against what lies ahead. Money is the one thing that can help you tide over difficult times.

You could do this by taking a parallel from your own life over the last few months.

Now more than ever, you have been spending time with family and doing activities together.

Some could be stuff you haven’t ever done before. When was the last time you had a conversation with your spouse about your family finances?

Make this a part of your monthly routine. Life is a crazy ride. It is a privilege to go through it with a partner!

Think about your financial values. How will you maintain financial discipline?

When we got married 20 years back, my husband and I had decided that we want to be debt-free as much as possible. We also lived within our means and managed our expenses accordingly.

That meant that we did not buy a sedan or go abroad till we could afford it through our savings. With all sorts of loans, it is easy to meet one’s aspirations but that comes at a high price.

Certainly, our financial values have helped us tide not only through this crisis but the crisis in 2008 and 2001.

The key to us being able to maintain our financial values was limiting our spending.

The lockdown has made all of us realize, how much money we waste on lifestyle expenses like buying clothes or eating out.

Now that you know that you can spend lesser, make a new budget with allocation for discretionary expenses. This would certainly bump up your savings and you can have your fun at the same time.

The extra savings should be used to create an emergency fund, which is equivalent to 6-12 months of your expenses.

Most individuals are underinsured for life and health cover and should work on increasing these covers.

It is very important to have at least Rs 5-10 lakhs for critical illness cover and do not look on this as an expense, but a necessity. Safety isn’t expensive, it’s priceless. That’s why you are wearing masks!

Happiness is when your cooking experiment is a success. The lockdown has got all of us to let go of our inhibitions and try new dishes.

How about letting go of biases and trying out new investments?

With the falling interest rates, how about considering the national pension scheme or equities for retirement. Or moving some funds from fixed deposits to debt funds.

Of course, you would need to read up a lot before you do this.

You can’t start the next chapter in your life if you keep re-reading the last one! Investing rightly in any instrument requires you to understand why the product works and the risks involved. Do not go by past returns alone.

If you do not have a financial plan, now is the time to engage with a fee-only financial planner to help you do so.

Stop being the chess piece, start being the chess player. It is time to master the game of money once and for all.

Published 17 May 2020, 16:55 IST

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