Wealth can be defined as number of days you can survive until your money runs out. There are lot of factors that can affect your wealth. Uncertainty in business and life is one such big factor that can cause your wealth to shrink. The pandemic has taught us to plan better for future to reduce the impact of such calamities in our life.
Keep the following points in mind while going through uncertain period in your life
1. Wrap up your affairs – Pandemic can be blamed for lot of unexpected and untimely deaths. I would advise family members, especially the old ones to prepare their will and other documents necessary. If you have an old investment or have lent money to others, do disclose it to your heirs and closed ones. Last thing you want is your closed ones running around while battling emotional loss.
2. Life Insurance & Health Insurance – Losing a loved one is difficult. Life Insurance helps you soften the financial impact of losing an earning member of the family. The adversity should not affect your goals and life style. Life insurance gives you the financial benefit which you would otherwise enjoy in absence of any adverse event.
With increase medical expenses, health insurance is a must. I recommend having a minimum cover of around 10 lakhs for a member of 4. Not having the right amount of insurance, can financially cripple you and affect all your financial goals.
3. Make a Contingency Reserve – One should have an emergency that should be equivalent to 12 months of daily expense. You should keep these emergency fund in liquid assets like a liquid fund or savings account to make sure they are available as and when you need them. Many people park their emergency fund in stocks, gold and real estate. You may not derive the required value when you exactly need them. So do not gamble your emergency fund for higher return
4. Invest in Health - The best investment you can make right now is on your health. It has higher returns than any of your funds will provide you. So get up tomorrow morning and finish that online yoga session that you have already paid for. Get used to those healthy juices and kawa for a better and healthier tomorrow.
5. Revise your financial goals - Plan your personal finance as if you are running your own company. If your revenues have reduced or stopped, you should cut down your expenses as well until things get back to normal. You will have to revisit your financial plans as your planned investment, savings and expenses would have changed. You should also be realistic in revising your financial goals as it may take some time for recovery and rate of return or loss maybe more adverse than earlier anticipated.
6. Minimalist Living – One of my biggest learning from the pandemic is that you only require basics to live a happy and satisfied life. We have been a victim on consumerism asking for bigger house, luxurious travel and fancy cars. Reducing your life to basics for temporary time period is not only good financially but also for your mental and spiritual well-being. Following poem by Piyush Mishra resonates my mind when I think about living minimalist.
हल्की-फुल्की सी है जिंदगी... बोझ तो ख्वाहिशों का है।
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