Synopsis
These are times when assets are being liquidated; savings are coming under stress; and incomes are protected as fiercely as possible. Many are aware that they have to find newer jobs, learn newer skills, and perhaps pursue a different role altogether. As we stare incredulously at the rising number of infected people, the deaths, and the panic, it becomes very tough to think of anything else. Our privilege as people with jobs, assets, and incomes hangs like an albatross. So much distress and so much setback.
The poor have been most affected. Many do not have jobs. They have not returned from the hometowns they painfully walked back to last year. Nor can they work from home. Each of us can identify at least one other family that we can support until they can begin to earn incomes again. The need is dire and urgent.
The large swath of middle-income earners have had COVID hurting their financial goals severely. Children admitted to expensive universities and courses are now studying from home. Those that need to go to college haven’t taken their exams and do not know how the admission process will work. Parents who have saved for higher education find that corpus hit by the falling markets. And they are not sure about taking an educational loan. Many students who have graduated in the COVID year don’t have internships or jobs. It is a break year all around for the young students and graduates. Anxious, but there isn’t any option but to hang on.
1. Subject your finances to a stress test
If you can last 18 months, you are still in the black. Anything less than that, you have to make plans for how to find the income. Work out a plan B anyway. If you lost your job and if your income stopped coming in from the next month, how long will your finances last? What would you liquidate, how much will you raise, and how long will it last? If you have savings power for three years, you have nothing to worry about.
2. Subject your expenses to an audit
These are not times for online indulgences; nor is it prudent to gloat about a higher saving rate. There is an alternate use, outside your household, for the money you can save by not spending needlessly. Stick to mandatory expenses and reduce discretionary expenses. Cut back on the urge to travel already, or to give yourself a break, a gift, a surprise for putting up with so much. The trial period hasn’t ended, so don’t let go yet.
3. Prioritise your assets and identify those that you can do without
That third one-bedroom you bought; those heirloom jewellery you never wore; those stocks you failed to sell in ages; those funds you forgot about; those deposits you did not close; and that PPF account you let go dormant. Gather them all and liquidate. Liquidity is more important than assets that are not being used. Tighten your asset holdings to only those that are performing; only those that matter; and those you would actually use.
4. Review your financial goals
Allocate funds for the household’s stability through this crisis. All other financial goals can wait. Their higher education; their marriage; their business proposition; their inheritance; their toys, gadgets, clothes, and accessories. Rework these to realistic estimates. Each one of them. Many of us have disproportionately large expenses planned for the children.
5. Extend your work life
You can’t retire early as you planned. Nor can you retire as scheduled. Two lost years of work and opportunity, and three more years of uncertainty has just added five more years to your work life. Find what you are good at; make sure you have something valuable to offer; and push for an opportunity to monetize that and earn an income. Shelve those entrepreneurial plans, unless your business idea is so aligned to today’s needs that it will generate adequate revenues. These are not times for risk-taking. Go ahead with the journey if you have a clear plan on paper with clear action plans.
6. Guard your investments
Do not assume that you have enough or that you are at just the right time for some momentum trading. Many households have ruined their wealth when the corpus was recklessly traded to make quick gains. These are not times for gambling with your wealth. There is no other way to look at uninformed investors trading on tips. Don’t get desperate about making money. There is a time to move and a time to stay. We are not yet in a position to move.
7. Do not extend your leverage
Be responsible about your financial decisions, always. Hold back and see how you can live within your means and postpone what is not important. This is not the time to take new loans, overspend the credit card, or borrow from friends and relatives. If you are already servicing your home loan and car loan, that is enough EMI already.
8. Allocate what you have into three heads
- What your household needs to survive, over the next three years;
- What you have as a buffer for the next three years;
- What you have as surplus after the other two heads.
- Give, donate, support, lend, and enable others to benefit from your surplus. These are times when empathy is the only quality that will save humanity.
- Recognize your privilege and remain confident that you will build it all back in time, for you aren’t broken.
“Remain conservative. It won’t hurt.
Remain cautious. It is alright.
Remain human. It matters the most."
