Finally, the year 2020, one of the most difficult years in the recent history of mankind when coronavirus brought our lives to a grinding halt, is behind us. It was a disaster in the form of a virus that struck mankind all over the world; people lost their lives, livelihood and struggled to cope up with the unforeseen circumstances. Economies, world over collapsed and businesses got shut due to worldwide lock down. Stock markets, world over collapsed by 35-40% in a matter of a few days. It was gloom and doom all over!

Slowly but surely, things started recovering and human lives started to find ways and means to cope up in the pandemic struck world. The year gone past has given us some important lessons on how we should deal with our finances. Let’s see few of these lessons

  • Requirement of Emergency Fund. Liquid cash in the form of emergency fund comes handy during the period of uncertainties. Six months of expenses including all the EMIs, should be available in this fund. Have this money available before starting the process of other investments.
  • Avoid unnecessary loans/debt. Loans, unless absolutely necessary to pay towards critical requirements, e.g buying a house for self living, must be avoided as people found it very difficult to pay their EMIs in case of job loss or salary cut. Use of a credit card for shopping and paying a minimum amount or converting it into EMI should be avoided. Although the Government had provided the moratorium for six months but the agony is not worth it.
  • Spend Wisely. Lockdown has made us realise that we need much less money to meet our routine requirements. This realisation can help us spend money wisely and save the balance for our better future. They say, a penny saved is penny earned. Saved money, if invested properly, can create a lot of wealth.
  • Take ownership of your Investments. Closing down of six flagship schemes of Franklin Templeton, default by a few reliance group of companies owned by Mr. Anil Ambani, Dewan Housing Finance ltd and other seemingly safe investments offering higher returns has put a lot of investor’s money at stake. The promise of higher returns ended up in swallowing most of the savings. Most of us tend to believe ‘others’ to invest our hard earned money without due diligence. When things go wrong, these people jump in to help, so investors stay with them instead of applying their mind and moving away, a point to ponder over as you plan your finances for the coming decade. 
  • Diversification of Investments. Investments in only one asset class can cause severe financial crisis during such periods of economic slump, as we have seen stock markets getting corrected heavily in a matter of a few days. Right asset allocation and diversification is must before we start doing the investments. Emphasis should be given towards investment in financial assets which can be sold easily online to meet immediate cash requirements as compared to physical assets, like real estate, gold in physical form etc.
  • Health Insurance. It’s important to have your own health insurance as during the pandemic times, people have suffered who were dependent on company health insurance policies. Due to job losses and cut in salaries/other benefits, many people could not afford the medical bills.

On the lighter note, we should be thankful to this virus who has taught us the very basics of human life, to say

  • Invest in yourself, there is no better asset than your health; health is wealth
  • Spend time with your family, near and dear ones as they are the most valuable asset you can ever possess
  • Invaluable assets are what nature has given us free of cost, breathing in the open sky without the mask, cherish the freedom of going out anywhere, anytime with your loved ones without any lockdowns
  • Less is more, we need very little to have a comfortable life. Avoid rat race and running after the money

Wishing all of you a wonderful year ahead!

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