Money management: During Covid-19 and beyond

This year, as well as the last one, forced millions of people around the world to make tough financial decisions. We experienced the most hard-hitting global health crisis that has ever taken place prior to this. Going back to workplaces, colleges, or schools is far from normal. The economic recovery is nowhere close to taking place anytime soon, but for those who are left with money at the end of each month, the concern might be, what to do with it. Whether to save or spend is the biggest dilemma. You may even be one of those who have had their hours cut or have lost their job. And even if you are still employed, there clearly remains a lot of uncertainty about how the future of work will be like.

No matter where you belong on that spectrum, you can still manage your money and take care of your financial health.

Figure out where you are

Regularly analysing and checking your finances is extremely important, and even more in the midst of this pandemic. So much of our “normal lives” has changed and surely, it has affected both, how we save and spend our money. During your days off work, remove time to go through all of your accounts and note what and how much you have been able to save, how your spending pattern has altered, and what debts have piled up.

According to financial advisors, analysing your spending is the wisest move right now, as it shows if funds can be allocated toward savings, or whether there’s a need to reign in spending on things like entertainment and groceries. You should be able to make adjustments to your expenses any time there’s a major change happening in and around you, and it’s safe to say, a pandemic is a major one. If you are someone who relies on technology for spending and managing your accounts, the whole process becomes easier.

Think long-term with your finances

When it comes to our social security benefits, the first step remains to always look for ways to free up cash. Typically, the biggest impact comes from big-ticket items like transportation or housing. At the same time, small fixes such as cooking at home or making coffee for yourself can also help over time. We have all witnessed since childhood how mothers slide even a tiny bit of an amount into a rainy day fund for unanticipated medical expenses or car bills.

Another proven hack to get money back in your purse is to cancel monthly subscriptions, like meal subscription boxes, streaming services, or iCloud storage. If you glance through the recurring charges of a 28-year-old with an affinity towards entertainment platforms like YouTube Premium, Amazon Prime, Spotify, and Netflix as compared to a 40-year-old with interests inclining towards outdoor activities, the former can be found spending triple of what the latter does. Experts suggest, you don’t have to get rid of all the sources of entertainment, but rather than paying for three different video streaming platforms, go for one that is most used. Eliminating such expenses doesn’t have to be permanent, but can free up some much-needed cash during times of need.

Keep a check on your debts

It is recommended to avoid any new debt, regardless of how well you are able to earn and save. A 33-year-old IT professional with stable employment at one of the top-ranking multinationals was lured to take advantage of low-interest rates to buy a luxury four-wheeler by taking out a car loan, after four months into the pandemic. What seemed like a great deal at first backfired in no time after he lost his job two months later! With savings that would suffice for not more than half the year and heavy liabilities including EMI for vehicle loan along with household expenses, medical bills, and a family to look after, he was left with no option but to sell his car to survive the pandemic and unemployment phase that lasted for over a year.

The truth is, debt is a liability, no matter even if it’s 0% interest debt. You still ought to pay it back. However, there are different ways to take benefit of low-interest rates that can help you get a better hold on your debt in the long run.

Refinance your home

Refinancing your mortgage at a lesser rate can help you save interest charges over time, and moreover, if you opt to go for a shorter loan term, say 15 years, you can consider reducing your interest rate all the more. However, do be conscious of the fees and try and avoid extending your loan term – in this scenario, refinancing can cost you more.

Contact your credit card companies

If you are doing well in terms of your credit card history, you may think of getting in touch with your credit card companies to check if they can lower your interests. The other option is a balance transfer card, wherein you roll your balance over to another card that has an extremely low or 0% interest rate promotional period. Importantly, if you want to save money with a balance transfer card, take note of the fees and map out a plan to clear the balance off prior to the completion of the promotional period.

Continue making investments

If you can manage to save and invest, do it. Don’t pay attention to what’s happening in the stock market and look for the bigger picture. If the stock market is down, investing during such times means your money can go farther. Stay focused on your long-term strategy; the market, sooner or later, is bound to recover and you’ll notice your portfolio bouncing back.

The final word

The uncertainty caused due to the ongoing pandemic has been hard on everyone. But at the same time, it’s important to reflect upon the positive changes that have occurred in the last year. What’s crucial is to be grateful for all the positive transformations, even if your finances have gotten hit. And as the popular saying goes, “money is necessary, but it’s not everything!”

(The writer is founder, Money Mantra. Views expressed are personal)