Money habits by Gaurav
Hi guys in today’s blog I going to tell you about the money
habits. Please implement this habits in your life and notice the change. So without
wasting any time let’s get started.
Covid-19 has forced us to look at some aspects of life afresh. For
many people, the financial fallout of Covid-19 has brutally exposed the fragility
of their personal finances. Salary cuts and job losses have left many
scrounging for cash. Despites being asset-rich, some have struggled to arrange
for liquidity to tide over a cash crunch. The disruption in income has blown
away rosy calculations and ambitious goals. Borrowers have been unable to
cobble together enough money to pay back hefty loans. Hundreds who have succumbed
to the virus have not left behind a will, leaving families without access to
assets.
The message is
clear, we must change our money habits and question preset notions of financial
security. Many of us are set in our ways of dealing with money matters. Just as
we revisit other facets of life post Covid-19, it is tie to refashion some of our
savings, borrowing and investing habits. Not sure where to start? After speaking
to financial advisors, we have zeroed in on a few areas that demand your
immediate attention. Not all of these tweaks can be done overnight. Some habits
may have to be phased out gradually. A new approach may take time to take
shape. But over time, these tweaks should put you in a better position to deal
with financial shocks.
Always have ample
liquidity
The pandemic has brought into focus the importance of having
enough liquidity at all times. Simply having huge savings doesn’t count for
anything if these are illiquid. Your prized real Estates assets won’t come to
your aid when in need of immediate cash. The lakhs stashed away in instruments
with a lock-in will also be out of reach. Forget about getting your money out of
traditional insurance plans either. It’s not at all wrong to have illiquid assets.
But it is vital to have sizeable chunk of savings in assets that you can sell
quickly on a rainy day. One man said that, “investing all savings without
providing for liquidity comfort will pose a serious problem when you
desperately need the money.”
You can ensure liquidity by setting up an emergency fund
that is big enough to take care of 3-6 months’ expenses. Some experts say a nominal
buffer of 3-6 months’ expenses may longer be adequate. On big tycoon said, “Emergency
savings need a drastic overhaul in the face prolonged threat to jobs and incomes.
At least one year’s expenses should be kept aside for this.”
The requirement
may be even higher for those engaged in more vulnerable occupations with
limited alternatives work, or for households where both partners work in the
same industry. It is also important to review your liquidity position
periodically. This buffer may be in the form of bank deposits or even
open-ended mutual funds, apart from idle bank balance. Having enough liquidity
comes at the expense of lower returns, but it’s a price worth paying.
Don’t borrow future
income
The ‘buy now, pay later’ philosophy has got a rude jolt. Amid
salary cuts and business disruptions, many individuals and households who borrowed
heavily are stuck in a quagmire. Some are unable to repay the loan while others
are left with little savings after servicing hefty EMIs. For many, the issue is
of borrowing more than they can afford. When talking on a big loan, most
borrowers may rosy assumptions about future income. Even if the loan or outlay
seems out of comfort zone now, many surmise that a rising income trajectory
will make it more affordable down in the line.
This logic often dictates the spending itself. Why not shell out a few
lakhs extra for the roomier 3BHK even when a compact 2BHK would suffice? In
lieu of the hatchback, what is few thousands more rupees in monthly EMI for
that swanky new sedan? It is this premise of borrowing from futures anticipated
income that can spell disaster. This thinking has to be revisited as shocks can
disrupt the best laid plans. Rege cautions. “Don’t fool yourself with false
optimism regarding the future. If often derives lifestyle changes that can be
painful to reverse later.”
Any lone decision
must be taken on the basis of prevailing circumstances. The thumb rule is that
all EMIs should not add up to more than 50% of your current income. Also, don’t
take a loan just because it is available. If your EMIs gobble up too much of
your income, other critical financial goals, like saving or retirement or your
kids’ educations, might get scuppered.
Now I think you know about the savings and about the wealth
now give me permission to end this blog. Met in another blog. So stay tuned. Let’s
become successful together. And thanks for reading blogs. And do comment and
follow my blog.
