4The pandemic induced lockdown has undoubtedly been a major impediment for all, from businesses striving to withstand liquidity crisis to job-cuts to salary cuts, these times are truly unprecedented and challenging. Also, financial plans are being redrawn with safer strategies being embraced.
Here are 4 financial planning mistakes you should avoid in post-COVID times, to help avert unwanted financial stress.
Exploring EPF fund withdrawal
Employees’ Provident Fund (EPF) withdrawals have been open for essential needs like medical treatment, children’s marriage, or home purchase. The COVID health crisis has led the government to relax measures permitting withdrawals from EPF to do away with temporary liquidity concerns. Also, note that an early EPF withdrawal can have a profound impact on retirement takeaway due to future compounding effect. Examine different prospects like selling some non-performing investments to help maintain instant liquidity needs.
Assuming it’s too late to have an emergency fund
In case of not having an emergency fund and having to undergo a sudden serious economic crunch will cause people to worry terribly. Instead, consider these arduous times as a drill and begin to create an emergency fund. It is never too late to have an emergency fund in place. The increasing uncertainty of the pandemic and without vaccination so far indicates that the economic ambiguity can last for a while. Thus, start creating your emergency corpus even if you never had one. For instance, the money that one would be spending on unnecessary shopping, movies, fast-food, social gatherings, and so on could be directed to this emergency fund.
Opting for blanket loan moratorium
The pandemic situation has caused the government to extend the 3-month loan moratorium to 6 months, which has been a lure to save money by opting for an EMI moratorium by most people. According to analysts, this should be an option only on facing an intense situation like a job loss and no fixed monthly income. Financially, the loan moratorium can be a burden in the long term as you continue to pay interests on the loan, increasing your final outgo. If you are a salaried individual and fortunate enough to receive a monthly salary, continue with the loan EMIs. If not in a situation to pay or is facing a job skepticism, consider chipping off some investments to pay off loans to be debt-free.
Avoid making an emotional decision
Monetary decisions must be made on fundamentals with objectivity, and not on an impulsive sentimental basis. The pandemic has significantly crippled India’s growth outlook. Consequently, stock markets have registered negative growth in the last 2-3 months. As an investor, watching investments taking a hit can be tough. But do not act on an impulse and exit the markets. This would not be an objective decision. Volatility is the characteristic of equity investments, accordingly maintain paying mutual funds, SIPs focusing on the long-term investment goal. Any significant structural modifications such as changing your debt-equity investment ratio should only be considered if circumstances have altered drastically like a job loss or so.
