The pandemic has left us on our knees, and we all are grappling with the reality of the second wave being far deadlier than the first. With more than 3,000 deaths due to COVID-19 reported daily in India, the COVID-19 pandemic has pushed almost the entire nation into lockdowns, crushed value chains, and stressed household finances.
This crisis is like no other, and your personal finance is not immune to the crisis. Therefore, smart money management is critical to survival through this period.
6 Ways to Manage Finance During COVID Lockdowns
The pandemic situation calls for calm-headed decisions that will help you strengthen your personal finance and come out of the crisis unharmed. We’ve put together a few tips and suggestions to help you manage different facets of finance during the lockdown.
1. Budget properly
The 50/30/20 rule is great to create an effective monthly budget. According to this rule:
- 50% of your income should be used to pay for your needs such as rent, food, education, loan payments, etc.
- 30% should be spent on things you want, such as movies, travel, shopping, etc., and
- 20% should be invested in safe money saving plans like fixed deposits, online chit funds or debt/equity mutual funds, which can be later used for making budget big expense such as college fees, weddings, medical bills, etc.
2. Cut down non-essential expenses
The curfew may have restricted your ability to go out of the house to spend money on your wants. However, this extended homestay has presented an excellent opportunity for you to assess your needs and your wants. Your needs should be on top of the list while your wants, which you can easily do without, should be avoided. Make a list of all your monthly expenses, segregate them on the basis of wants vs needs and try to cut costs on non-essential expenses. Most importantly, stick to your budget.
3. Develop a frugal mindset
Developing a frugal mindset will help you identify ways of saving money. Some money-saving tips are as follows:
- Use online payment services for cashback or rewards.
- Purchase non-branded clothes & accessories.
- Increase the temperature of the home air conditioner to at least 24 degrees Celsius.
- Switch to cost-saving LED or CFL lightbulbs.
- Take all electronics like A/Cs, TVs, Laptops, etc., out of standby mode to save money on electrical bills.
3. Look for ways to boost your income
Take up part-time jobs, start an online business, or pick up freelance projects that can be done outside office hours. There are several websites that allow you to bid for these projects. Online tutoring is also a good job opportunity to increase your monthly income. The best part about these types of jobs is that they do not require any investment except your time.
4. Build an emergency fund
With so much uncertainty lurking around, life can catch us unaware anytime. You need to be financially prepared to face these uncertainties. Create an emergency fund of at least 3 to 6 months of your living expenses. This fund has to be parked at a place where you can easily access it at short notice without being penalised.
5. Avoid debt
During the lockdown, shun debt like a disease. Refrain from borrowing, even if it’s from your family or friends. Avoid using a credit card if you can. If you are not in a financial condition to pay your existing loans, immediately get in touch with your bank and seek help.
6. Use the time at home to declutter and sell the things you don’t need
There’ll be stuff in your house that you may have never used. Don’t hoard things in the hope that you will use them someday. If you haven’t used them in the last six months, the chances are that you may never use them. Sell these goods or consider donating them.
Remember, like all the crises and natural disasters, this pandemic too will eventually die down. But while it’s here, it’s important that we use the time to make sound financial decisions to come out of it financially stronger.
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