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While welcoming the year 2020, the world was introduced with pandemic named COVID-19. The outbreak of COVID-19 seemed to have affected the world by bringing all the sectors from trade, finances, education, entertainment, and many more at halt. India recorded its first COVID-19 case in the month of January, 2020 and by the month of March the number of cases kept on increasing uncontrollably. As a preventive step towards the seriousness of the situation, the Indian government imposed strict lockdown in the entire country from 23^rd March, 2020.

This lockdown have led to an extreme level of unemployment where almost 2 crores 70 lakhs youngsters (in their 20’s) in India lost their jobs during the month of April, 2020. Such an uncertain unemployment further leads to several financial crisis & imbalance of budget in an individual’s life. To overcome such financial crisis like one in this pandemic; an individual can follow a 7 step formula that will help us fearlessly face any financial uncertainty in future.

Below are the 7 steps to be followed to live a worry free financial life:

1. Choose your loans wisely and try to be debt free: Make sure you take a loan on best available rate. As much as possible stay away from personal loans & loan on credit cards. Avoid shopping on EMI as it does a harm to your financial stability. Try to repay your debts at the soonest possible because a debt free life is the best for financial freedom.

2. Make a budget of your expenses: Believe it or not, we live in a world of consumerism where 24x7 we are bombarded with the advertisements of attractive products, sales offer, and captivating one liners like BUY-NOW which never fails to grab our attention. All these marketing tactics provokes us to a level where we end up buying things we do not need. To avoid such circumstances, it is advisable to make a monthly budget of your expenses and follow it strictly.

3. Contingency fund is a must: One should always save for contingency fund i.e. emergency fund which turns out to be helpful during uncertain financial crisis. Emergency fund should be either your expenses for 6 months + EMI or your 6 months’ salary. It is advisable to can save your emergency funds in either liquid funds or fixed deposit so that you can withdraw them whenever needed.

4. Buy a suitable health insurance: Medical inflation rate in India is 15% which can lead to a heavy dent on our savings in case of medical emergency. It is usually observed that the employer provides the facility of medical insurance to their employees which seems beneficial. With relief to such benefits, the employee fails realize that this mediclaim facility gets terminated after they quit the job. One of the biggest disadvantage of this benefit is that the employee forgets have a separate/individual mediclaim. Such scenario creates difficulties for an individual to buy a mediclaim insurance when much needed and it gets tedious, and expensive after the age of 45. It is always advisable to have a suitable mediclaim for yourself + family members’ in order to overcome such medical emergencies like the one we are facing now.

5. Buy sufficient term insurance: It is observed that the number of people opting for term insurance in India have been gradually increasing day-by-day. As per a thumb rule; an individual should take up insurance to 6 times of his/her gross income which should also include 60% of total amount of outstanding loan.

To know more in detail about insurance, you can watch our video: https://www.youtube.com/watch?v=o6HMSMKi3sA&t=1s

6. Make a goal oriented investment: “Without a goal and a plan to achieve them, you are like a ship that has set to sail with no destination.” Make sure your all investments have a specific goal/s attached to them; this will surely give a direction to your investment. Also, this turns out to be the most important step in your financial journey.

5 advantages of doing goal oriented investment:

• It helps you to tackle inflation.
• It helps you focus on achieving long term goals.
• It helps you to overcome emergencies.
• It helps you fulfilling your dreams.
• It also aids a financial relief to your post retirement life.

To know more in detail about how to do a goal based financial planning? You can watch our video: https://www.youtube.com/watch?v=tv9U2UZcVRA&t=17s

7. Start SIP investment regularly and increase every year: Discipline plays an important role in investment which can be achieved through SIP. It is advisable to start investing in SIP at the earliest and to keep on increasing the SIP amount on yearly basis. Make sure that a part of your increment adds to SIP.

We hope that you found this article useful, for any further assistance/guidance on investment, feel free to contact us on info@bihagbhavsar.com