3 pivotal money lessons we have learnt from covid-19.
All of us were shattered by the Covid-19 pandemic. Not just us – Individuals, but the global economy itself has encountered an unavoidable recession.
Not just that our travel, parties, and social gatherings have been turned down, but the pandemic has played havoc with our money and financial security also. Most of the families and organizations went stony broke. Studies show that – ‘The pandemic has mostly hit the retirement plans of people in the west’.
Enough being said about the negatives that the pandemic has brought, we need to also recognize the noble teachings it has taught us. After all “Tough times teach the world’s greatest lessons, isn’t it?
Well, here are a few of my interpretations that the pandemic has taught me. And of course, to most of you as well. Let’s discuss a few below.
1. The importance of an emergency fund.
I have never heard more about this type of fund until the pandemic hit. I mean, most of us wouldn’t have! Only after the pandemic, people have started to realize the weight of not having an emergency fund. Let me explain what it essentially is.
An emergency fund is a corpus you set aside to tackle emergencies. Unexpected expenses come at unplanned times right!? Basically, this fund provides you enough money to meet that emergency. ‘Liquidity’ is the prime component of this fund. How instantly you can withdraw it serves the purpose.
NOTE: Your investments in Mutual funds or Fixed Deposits are not emergency funds as they are not highly liquid.
Open a separate bank account for this purpose. Keep accumulating a sum every month from your income. We recommend 3 to 6 months of your monthly income be accumulated in the fund. For example: If you earn $2000 per month, make sure to accumulate a sum of $6000 to $12000 in the fund.
2. Buying an additional Health insurance
The pandemic has left a huge population jobless. Hospitalization expenses have hit an all-time peak and we can’t ignore being treated in an emergency. Employers offer health insurance plans to their employees – but is the coverage sufficient? Mostly no.
So instead of just depending on the group plan offered by the employer, opt for a comprehensive plan to necessarily cover up you and your dependents. You could select your coverage, obtain add-on protection and do much more.
3. Borrowing loans within the repaying capacity
Loans are good funding options that aid in achieving our long-term goals. But, they could turn quite risky, especially during such unprecedented times.
Especially when people were being sent out of jobs, repaying loans has dodged a bullet in their lives. So it is always advisable to assess your repaying capacity well before you obtain a loan. Understand how much you can afford to repay every month, if there is distress – do you possess other sources to pay off the loan?
Answer these questions and then move forward because hefty loan repayments could result in great psychological stress.
Yaay!! Those were the top 3 learnings the majority of the people – including you and me, would have realized under this pandemic.
Tough times don’t last long, so let us dust ourselves and look forward to the welcoming future. See you soon :)
