The sudden outbreak of the Covid-19 pandemic brought everything to a sudden halt. Just like our lives, it disrupted many sectors of the economy. It also changed how people think about money and plan their finances. Poor financial management can cause significant stress in individuals, hampering their overall health and well-being. It helps to differentiate between wants and needs. And funds should be allocated for fulfilling physiological needs.
Whether it’s planning for the long-term future or managing existing debts, getting finances in order is vital to physical, emotional and mental wellbeing. The crisis derailed many from fulfilling financial goals. However, chances are high of recovering from those setbacks by strategising properly. It is advisable that one stays in regular touch with their financial advisor the same way they consult their doctors when keeping unwell. Now is the time to overcome any possible financial setbacks caused by the pandemic which left many with stress and anxiety.
How to plan finances properly
Amit Narula, co-founder and director of Money in Minutes, said that a proper planning of finances also ensures a better standard of living. With adequate funds, people can take care of monthly expenses, invest in future goals, and even splurge a bit without having to worry. Financial planning helps in managing money efficiently so that people can enjoy peace of mind.
He said that it is impossible to save money without a financial plan in place. When there is a financial plan in place, it gives a good deal of insight into total income and corresponding expenses. “This can help in easily tracking and cutting down extra costs consciously, thus increasing savings in the long term,” Amit said.
Ways to improve financial wellness
Like most of our everyday stress, even the stress related to money management can be effectively dealt with. There are healthy strategies available that can help in managing finances as well as wellbeing. These are:
Identify the financial stressors
Sensible planning is essential to organising finances. One must take stock of their current financial situation and what causes them stress. Write down ways in which you and your family can cut down on expenses or manage your finances in a better way. Then draw up a specific plan, commit to it and review it from time-to-time. Also, list down your financial goals for the future – these can be short-term and modest like saving for a family vacation or essential and urgent like paying off electricity bills.
Recognise reactions to financial stress
In difficult economic times, some people are likely to turn to unhealthy activities like drinking, smoking, gambling, drugs or emotional eating. The financial strains can also lead to a rift and arguments among partners. One needs to be alert to these behaviours. If they are causing serious trouble, then one must seek timely help from a psychologist or community health clinic.
Different types of bank accounts offer different facilities and services to the bank customers. This also depends on the place of living. It’s advisable to use a current account to manage day-to-day transactions as these accounts provide instant access. Most banks also offer free online banking services which can help one stay on top of income and expenses with a single click from their laptop or smartphones. Some accounts offer cashback or other benefits. So, shop around to get a good deal.
Create a flexible budget
Initially, setting forth a personal budget may seem like a task, but it’s an essential discipline, especially if one has to reach those financial goals set for oneself. People who have the habit of budgeting are less likely to fall into debt or be caught off-guard by sudden expenses like medical emergencies. A budget includes a list of regular income, essential expenses and non-essential outgoings. Out of this, target the non-essential expenses to see what can be reduced or eliminated. Also, one must keep re-evaluating their budget to find new ways of saving cash.
Revisit debt strategy
Financial advisors always have one piece of advice to give: never carry debt, specifically credit card debts that have a high interest. Though in the current scenario, the stock market is volatile, and interest rates have sharply reduced. Hence, it’s the right time for those who have loans pending to get them refinanced at a much lower rate. Opt for a balance transfer credit card to secure a low rate of interest on the credit card debt.
Keep more liquidity
One lesson that the pandemic has taught us is that it’s necessary to keep more cash handy. And the emergency money must be accessible to other family members too. For example, keeping cash ready helps in cases of medical emergencies or paying tuition fees. In addition, having a list of assets that can be liquidated when required, such as property, equity, and gold can help during tough financial times, even if sold at a loss.