The spread of Covid-19 at an alarming rate and the lockdowns imposed to contain the spread of the virus has wreaked havoc on the lives of people across the world. Amid all the pandemic-induced chaos, financial uncertainty has posed the greatest concern. Businesses, organizations and several economic activities were the worst hit by the lockdowns and restrictions on movement.
According to FICCI, 80% of organizations reported a noticeable decrease in the cash flow as a result of the Coronavirus pandemic in India. The situation has left people financially insecure. Hence, it becomes mandatory for people to make a proper and in-depth assessment regarding their present financial condition and the implications of the pandemic on it.
Following are the five personal finance concerns in these uncertain times that need to be addressed:
1. Inadequate Emergency Funds – It is wise to have sufficient funds to deal with an emergency situation. It cannot be denied that the pandemic and the series of lockdowns brought the realization of the need to have adequate emergency funds that could support the household during adverse situations arising out of a pay cut or loss in business. Most importantly, people must have at their disposal separate funds in order to meet the expenses of a medical emergency.
2. Increase in debt – Increased debts are really concerning people during this time of the global pandemic. Those affected by a financial loss in work find it hard to pay back the loans taken for several obligations related to the household. Especially the home loans taken on high-interest rates are increasing the burden of the low-income families. Not being able to repay them on time results in a surge in the amount of debt. According to the IBEF, a LinkedIn survey conducted among 2,022 Indian professionals for the 16th edition of the Workforce Confidence Index, indicates that 35% are expecting an increase in their recurring debt payments, 35% are expecting an increase in personal spendings and only 30% are expecting an increase in earned income.
3. Delayed or late payments – Late payments are disadvantageous as people often have to pay extra charges. So, this financial concern must be resolved to avoid extra charges It is of utmost importance to find out an effortless means to manage the financial liabilities. People can benefit by choosing the auto-pay process for the payment of EMIs. If someone does not have sufficient funds to pay the EMI, he/she can contact the bank to discuss the terms associated with the loan and to extend the date of its payment.
4. Problems related to cash flow – Cash flow is very crucial. Any issue arising in the cash flow keeps concerning people as it disturbs the periodic budgeting process. Cash flow issues become an obstacle for those who need to fulfil financial liabilities. For businessmen suffering from loss due to the spread of Covid-19 and subsequent restrictions, problems of cash flow may be more than ever before.
5. Lack of health and life insurance plans – As the Coronavirus has not been fully brought under control, people must choose good health and life insurance plans. These are instrumental in strengthening them to cope up with an unanticipated emergency situation during the pandemic. Lack of insurance leaves an individual as well as the family members vulnerable to difficulties and unprepared to handle financial obligations that might come up at any moment. Having a life insurance plan supports the entire family when faced with a crisis. Health insurance provides coverage against most medical emergencies and the expenses as a result of those conditions. Especially, those health insurance providing coverage against Covid-19 related illness must be taken, as it is a need of the hour.
Considering the uncertain times, it is vital to address the above-mentioned five major personal finance concerns as soon as possible. An effective plan for the proper management of finances can help in the smooth functioning of life and relieve an individual of lots of worries.
Besides realizing the need of saving a particular sum of money periodically, efficient budgeting and elimination of unnecessary expenses can be very advantageous.
Hence, keeping in mind the widespread impact of Covid-19, one has to remain financially strong to face any unforeseen situation that might arise.
by, Raghuvir Gakhar, CEO, CashBean