Covid-19 pandemic has a tremendous impact on our financial health. There is an urgent need to rebuild our approach to handling personal finance. The four pillars of household finance-income, spending, savings, and investment have changed drastically.
Millions of livelihoods have been affected by this pandemic. The most significant problem is the risks of income. The migrants have lost their livelihood, and it is not sure whether they will find work in their villages and whether there will be better times ahead when they will comfortably travel back to cities for jobs. There are a large number of wage earners who have made the cities their home, but do not have jobs.
There is no work and pay and, also there are not many savings to keep going without income. They are depending on hand loans and pledging the few things they have accumulated. And many of them who were the monthly income earners, have lost their jobs, many others are unsure how the work from home situations will extend over time. All the children are at their homes, with no hope of schools reopening. As, the businesses are closed, those who ran businesses have no income. As there are no buyers, stocks remain unsold and bills remain unpaid, and thus there is no revenue. With the crisis, families have learned to cut back on a lot of spending. Now, there is no expense on entertainment, travel, furniture, eating out, and these all have become a new norm. Most households are postponing their expenses beyond grocery and utility bills.
Banks and NBFCs should be able to provide short term finance as they have enough liquidity at this time. As the income has vanished and reduced and settled at a new low, there will be an increase in the demand for loans. Nowadays, credit card usage is down and so, is online shopping. Households might be valiant about using newer unbranded suppliers of goods and services and also they might be willing to support local businesses. People or the households who are having surplus money are allowed to remain in the bank, and, those who do not have enough money they have not seen the bottom of the falling markets.
Now it is completely in our hands to spend money only on the essentials, step out only when needed until a cure or a vaccine is found, then only we will be able to claim victory over this pandemic. The next 12 months might define the new culture and the character of the households.
