1. An emergency fund is crucial
The pandemic had different financial implications for all of us. Some lost their jobs, and some saw salary cuts as high as 50 per cent. Naturally, this made it difficult to pay EMIs, insurance premiums or meet regular expenses. Those who had an emergency fund could dip into it to see through the hard times. Those who did not have such a fund would have needed to dip into their savings or redeem their investments. Covid -19 taught us that it is vital to have an emergency fund, because unfortunate incidents do not come with any prior warning.
Refer: Emergency Fund: How to Build one?
2. Adequate health insurance is important
For those who got infected by the virus, some or all family members may have had the need to be hospitalized. Since the cost of Covid hospitalization, at least in the initial days, could be very high and run into lakhs, it put a strain on families who did not have adequate health insurance.
If more than one family member got infected, the family floater coverage might not have been enough to cover the bills, leading to out-of-the-pocket expenses. Covid taught us that it is very essential to have adequate health insurance to cover for health emergencies. So, it is important that you review your health insurance and take necessary steps.
Refer articles related to Health Insurance
3. It is easy to cut down on discretionary expenses
Many of us tend to live paycheck to paycheck and the way to get over that is to create a budget and cut down on discretionary expenses. However, that is easier said than done. But during the Covid lockdown it was not possible to eat out and watch movies and spend on discretionary items. Even after the lockdown was over, going out was limited. That would have given us an idea that it is possible to cut down on one's expenses and have a surplus at the end of every month.
Whether we wanted it or not, Covid gave us a lesson on how to cut down or even eliminate discretionary expenses altogether. The idea is not to do away with all kinds of discretionary expenses, but have a strong control on them. This would mean that one can be free of living beyond one’s means or paying very high credit card interest.
Believe in your Potential but Live within your means .. for a Confident, financially independent Life
4. One should not panic when markets crash
The markets crashed majorly in the early days of the pandemic. On March 23, the Sensex fell by 3,934 points or by 12.71 per cent. The market had also crashed on March 12 when WHO declared Covid as a global pandemic. In such instances a lot of investor wealth was wiped out. When markets correct majorly, a lot of us are tempted to stop our SIPs and redeem our equity investments.
But the Sensex has bounced back majorly in less than a year and currently it is at over 50,000. In fact, when the markets correct, it is a good time to buy more. However, since timing the markets is not possible, SIPs in mutual funds are the best way for retail investors to invest in equity.
Once again Covid taught us a very important lesson about investing in the stock markets. While picking up the right stocks and investing in the right mutual funds is important, when investing in equity, it is important that one takes a long-term perspective. It does not pay to get unnerved by volatility and take rash investment decisions.
5. Rebalance your portfolio
You would have heard of the need of having a proper asset allocation. But when markets move up and down substantially, your asset allocation changes. For example, when the markets crashed last year, your exposure to equity would have gone down. It is important to periodically balance your asset allocation. If you followed this rule and balanced your asset allocation post the market crash, you would have benefited now.
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