It is two years since the first Covid lockdown was imposed and our lives will never be the same. If nothing else, then the pandemic has made many of us take a fresh look at our priorities. Unplanned medical expenditures, job losses, pay-cuts and volatility in the stock markets have all played a part in how we now visualise our financial lives.
According to a recent report by Standard Chartered, Wealth Expectancy 2021: Bridging The Confidence Gap, almost 94 per cent of the Indians who participated in the study (1,501 people in India), have set new life goals which include better health insurance, more savings, etc.
1. Emergency Funds Are Top Priority: Providing for emergencies as a whole is at the top of everyone’s minds. It is important to provide for the immediate future so that one can tide over short-term emergencies, medical or otherwise. Build an emergency fund so that it is easier to deal with loss of employment or a pay-cut. Most experts suggest saving a corpus amounting to six months of expenses; post the pandemic, some suggest topping this up to one year’s expenses. For a medical emergency, having adequate health insurance is the answer.
2. Taking Care Of Health Insurance: Health has become a priority and health insurance for the whole family is an immediate goal. “Remaining underinsured or uninsured has a direct implication on your overall finances,” says Harshad Chetanwala, co-founder, MyWealthGrowth.com. If you don’t have health cover, get one and ensure that it is adequate. Don’t depend only on the insurance covered by your employer. You can also use top-up and super top-up plans to enhance coverage based on an existing policy.
3. Towards Higher Savings: Saving more is the other financial goal that has come into sharper focus. Job losses and pay-cuts have made people rethink their spending and saving habits. If you too want to increase the amount you save, try to do so with some goals in mind. Goal-based saving is an effective method. Look at your expenses and see what can be trimmed. Now that restrictions have been removed, eating out and socialising is likely to increase. Take a look at such discretionary expenses to see where all you can cut back and save.
4. Plan Even For Short-Term Goals: Till recently, many of you planned for long-term goals but not for the near-term goals thinking those can be managed anyhow. But if we do not plan for near-term goals, we may end up paying for them with money meant for other purposes, which could derail some important goals.
5. Strategise For Long-Term Goals: Long-term objectives like retirement, which may be 10 or 20 years away, may not be immediately affected by an event like the pandemic. Any short-term financial hurdles can be overcome in the long run. But it can create issues for those who plan to retire in a few years’ time. If the retirement corpus has got affected, experts advise extending the time to retirement by a few years, if possible. Making the investment portfolio a little more aggressive is another option to regain lost ground. However, do remember that equity investments pay off in the long run; in the short term, volatility risks are high.