The whole of the country is facing the deadly second wave of Corona Pandemic. The second wave is deadlier and has brought in more uncertainty about everything around us. We do not know how many more waves this pandemic will have and how long its impact on economy and business last even after the pandemic has subsided. Such a difficult and unprecedented situation calls for drastic action plan and immediate decision making. I wish to discuss certain things one should do and also the things one should refrain from doing during these hard time we are going through.
Need for the measures being suggested
Many have already lost their jobs or have seen their earning drop substantially. We do not know how many will be able to retain their jobs looking at the downturn anticipated in the economy. The second wave has hit us harder. It may even have more adverse impact on earnings of the salaried and self-employed equally. So it is imperative that we implement some measures to minimise impact of hardship present and anticipated.
As the saying goes,” cash is king” so one should preserve cash resource to the maximum possible. You should stay away from splurging unnecessarily and should not spend unless it is needed for bare survival. In case you are contemplating any big ticket purchase like car, television, mobile phone or any other costly electronic item, please postpone it till you become confident that the pandemic has almost disappeared and there is not risk to your future cash flow. Even if you are planning to buy a house with a home loan, please postpone it also looking at the huge certainty which lies ahead.
Create and maintain contingency fund to prepare for any eventuality in near future
As a prudent financial planning each one is supposed to have a contingency/emergency fund equal to minimum of 6 months of your outgoings, including EMISs which can preferably be invested in liquid funds. This will take care of your expenses in case you lose your job/livelihood. It also comes handy even in an emergency like situation in family be it sudden hospitalisation or any similar unexpected situation. Those who have already lost their jobs and had contingency funds are better off today than those who did not have it. Those of you who have been able to retain their job should also create contingency fund immediately because the situation is very uncertain and the vicious cycle of declining economy and people losing their jobs may last longer than we think. I would suggest you to have contingency fund of around one years of expenses as the job market is very bad and in case you lose your job, it will be difficult to get another soon.
Do not borrow or use credit card excessively
One should not borrow unless it either adds to your income or helps you create a tangible asset. Moreover, the money to be borrowed should also be commensurate and appropriate for the occasion and your financial standing. These are the golden rules of borrowing and are universally applicable during all the times and more during the bad times. This is because one does not know how long the bad times will last.
Buy health insurance and life insurance
Almost all of you must have heard about the huge bills of hospitalisation of Corona patients. It is suicidal for a person not to have a medical insurance for himself and all his dependent family members. So in case you do not have any existing health policy, please buy one immediately. If you cannot afford a full-fledged health insurance policy due to paucity of funds, at least buy the Corona specific “Corona Kavach” policy which is available from all health insurance companies. Corona Kavach covers your hospitalisation costs. This is an indemnity policy where the insurance company will pay directly to hospital or reimburse your hospital bills.
Even if you already have health insurance provided by your employer or have your own policy, I would advise you to buy “Corona Rakshak” policy which is a benefit policy under which the insurance company pays you the full sum assured irrespective of the expenses incurred provided you have been hospitalised for minimum of 72 hours. Since the existing insurance policies, in most of the cases, do not cover cost of PPE kits and other consumables, Corona Rakshak will take care of the amount deducted by the insurance company while settling the claim for such items.
Like a health insurance, it is equally important for a person, who is financial pillar of the family, to financially protect the family members. And for this purpose one should buy a life insurance policy. Though the recovery rate is high but the times are very uncertain in terms of probability of one’s survival in case one gets infected. So you should buy a life insurance policy immediately in case you do not have adequate life cover as of now.
The write is a tax and investment expert and can be reached at email@example.com
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