How to regain control of your expenses during a pandemic?

Uncertain income flow, possible layoffs, and pay cuts have upended household finances. It’s hard to airbrush reality; there is a clear need for immediate damage control that involves a relook at everything from savings to investments to routine shopping to impulse buys. Here are some practical tips that can help you steer your finances through choppy waters.

How to regain control of your expenses during a pandemic

As a Black Swan event, COVID-19 caught the whole world unawares. From governments to businesses to individual citizens, the impact has been direct, indirect, and to a certain extent, existential. Apart from the impact on health and the enforced change in routines/protocols, the blow has been severe on the financial front. The pandemic has forced a rethink and the need for a rejig in spending, earning, saving, and planning finances. 

Here are some actionable changes that you can bring about to meet the challenges thrown up by the pandemic in various situations.

Earnings unaffected? Here’s how you can make the most of your good fortune

You belong to a select category of the fortunate. Your earnings are not affected, and you may have a strong urge to spend, especially with lockdown restrictions being lifted. However, this is a time to exercise caution. The average household expenses have reportedly come down by 20%, owing to the restrictions on eating out, travel, and retail shopping. It is quite evident, that barring a few exceptions, the inability to spend on these activities have not impacted routines significantly. It is therefore necessary to aim at reducing expenditure in the ‘new normal’ and invest the amount intelligently. 

Priority-based spending is the need of the pandemic hour. Grade your expenses into high priority, necessity, luxury, and impulse. Stay away from luxury and impulse spends. Instead, invest time and money on your health. Not only will this dissuade you from spending time in high-risk locations such as malls and restaurants, it will also improve your health. As you age, your medical expenses are naturally expected to increase, depending on the condition of your health. 

Related: How are millennials coping with COVID-19 crisis?

Pay slashed? Here’s how you can manage your finances better

It’s been estimated that 40% of employees have faced a cut in pay. If you belong to this category, there are adjustments that can be made to ensure that life goes on even with a reduced income. Most households have expenses that are overlapping in nature, mainly for convenience. For instance, multiple broadband connections in a household serve no purpose. Plans are often chosen arbitrarily; not based on actual requirements. Subscription to entertainment channels is also driven by the service provider’s bundled offers. Expenses on such digital indulgences can be slashed by as much as 20%. 

Similarly, expenses towards experiences that are purely hedonistic in nature can be put on hold till one’s salary is back to normal. Most of the gadgets we buy are ‘shiny toys’ that lose their appeal after a short while. These add-on purchases are often enticingly positioned by retailers. Stick to your original goal of purchasing only those products or services that you absolutely need.

Related: Did your income change during COVID-19 crisis? Here are some tips to get back on track

Lost your job? Here’s how to take control of the situation financially

The pandemic has resulted in pink slips being handed to 15% of employees in various sectors. If you happen to be one of them, do not panic. You can handle the situation better with a cool head. The first action should be to cancel all subscriptions that are non-essential, such as streaming services. Regarding your broadband/mobile connection, have you subscribed to a premium plan with a higher tariff? Or taken paid subscriptions for online services/products? Cut down on what’s not important and you will be surprised to see how much you can save by the end of the month.

It is important to not use your credit card till you are securely back in your job. The only exception should be cases of hospitalisation and other medical expenses. Avail of the government’s moratorium on EMIs/loan repayments if necessary. Take a small loan to tide over the crisis or, if you have multiple insurance policies, surrender one of them.

Related: Lost your job or planning to quit? Here’s how you can benefit from your EPF

The need for a change in lifestyle and spending patterns

There is an urgent need for all individuals to bring about a change in lifestyle and spending patterns. Here are some actionable changes that can be very effective.

The best ways to raise funds

  • Make use of government moratoriums
  • Withdraw funds from your EPF
  • Surrender one insurance policy if you have multiple policies – this will fetch you liquidity
  • Look at options in the gig economy as a stopgap arrangement and use your expertise to earn on different platforms
  • The final option when other methods do not help you to manage funds is to avail a personal loan. This should be more of a bridge loan, which should be exited at the earliest. 

What to target when cutting down expenses

  • Do not use your credit cards
  • Restrict spending to only essential requirements
  • Do not purchase consumer durables as a replacement for existing/ageing durables
  • Put home improvements on hold
  • Knock unnecessary accessories off your shopping list

Best options for saving during the pandemic

  • Put your money in gold as it is a safe bet compared to other assets like equity, debt, or real estate
  • Invest prudently to earn profits from volatile markets. The possibilities of earning are good, however, there are risks involved and it is essential to be cautious when trading during the highs and lows of the market. 
  • Build an emergency fund; you may find the need to quickly dip into your savings to meet expenses
  • If you have excess cash or earnings, it would be good to foreclose existing loans and exit the liability period as early as possible

Last words

The new normal is likely to persist for much longer than we expect, and it might be a long time before we can let down our guard. During this period, it is essential to make smart moves so that we can emerge from the crisis relatively unscathed. Depending on how the pandemic impacts our life and earnings, it is essential to make appropriate changes. Life must go on, but with a few judicious alterations to ensure that we are well-equipped to make it to the other end of the pandemic. Aftermath of COVID-19: Which sectors will struggle, which won’t.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.


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