The 5 Financial Lessons from 2020 that you just cannot ignore
In the past few months have you felt amazed at the amount of money you have saved by not eating out at restaurants, shopping or traveling? Or have you wondered how different the lockdown period would have been had you saved and invested regularly? Most of us have had a lot of time to reflect about our money habits and learnt a few lessons when it comes to money. And if you haven't had the time to reflect on your finances between working from home and innumerous household chores, here are five financial lessons that you just cannot ignore.
An eye-opening lesson most of us learnt during the lockdown is that the majority of our expenses are on leisure expenses. The weekly shopping binges, the frequent restaurant meals and coffee indulgence – seems like we can survive without them as well. So this global pandemic has reminded us that we must spend prudently at all times.
Save, save and then save some more
In the past few months the overriding emotion most of us have felt is that of uncertainty. Uncertainty when it comes to our health, wealth and well-being of our loved ones. A lot of us have faced uncertainty with respect to our jobs and livelihoods. With income being impacted, most of us have at some point wished we had saved more money when circumstances were better. So the second lesson this pandemic has taught us is to save as much as possible for a rainy day.
Build an Emergency Fund
The pandemic has highlighted the importance of being prepared for situations where income may be impacted and the need to build an emergency fund. An emergency fund will bail you out of a medical or any other emergency during such times when your income is impacted. Ideally you must keep aside money to cover basic living expenses for at least 3 months, in a highly accessible investment product such as your Savings bank account. Another 3 months worth of expenses should be parked in a 6 month Fixed Deposit or Liquid Mutual Fund.
Take adequate health insurance for you and your family
The fear and uncertainty of contracting Covid-19, had many people scrambling to check whether their existing health insurance policies were adequate. In India, most employed individuals rely solely on the insurance provided by their employer. Such group health insurance is insufficient and lapses once you leave the organisation. Thus, apart from your employer-provided health insurance; you should take health insurance of up to Rs 5 Lakh as an individual or at least Rs 15 Lakh for a family of four.
Don’t try to time the market
Over the past few months the ups and downs in the stock market have given investors sleepless nights. While some have sold their investments in panic trying to cut losses, others have been speculating which industry or investment product is worth investing in. In such times you must simply be patient and remember that despite major financial crises in the past the stock markets have always recovered. Instead of panic buying or selling, focus on your financial goals. Be it saving for your retirement, buying your dream house or saving up for a vacation, start saving and investing consistently for all your financial goals. While investing consistently, it is important not to put all your eggs in one basket. Do not put all your money in a single investment product like a bank fixed deposit or stocks.
By following the above points, not only will you remain focused on your goals but you will also have a diversified portfolio. So instead of panicking by watching the news or getting contradicting advice from friends, simply focus on your financial goals and wait for the markets to improve. You can also download the Basis app and begin your journey to financial independence!
Basis is a first-of-its-kind platform, aimed at enabling women to achieve financial independence through expert advice, in-app learning modules and supportive communities.