Post Covid roadmap to restore financial wellness- The New Indian Express
Express message service
NEW DELHI: When Vivek Mathur (37) decided in May 2019 to quit his engineering job in order to start
freelance and taking time for his hobby and family, his financial goals were clearly defined.
With an average monthly salary of Rs 80,000, he left his job with a fixed deposit of Rs 10 lakh, another 12 lakh in a mutual fund, and an EMI of Rs 35,000 on his home and car loans. His wife had a decent salary to take care of other common expenses. Everything went well until Covid-19.
Despite paying a large hospital bill, he was unable to save his father and, to his sorrow, was struck with a bill of Rs 18 lakh for treating his wife and both parents, with insurance companies paying only 60% of the amount. His duties dried up and his wife, who worked in the hotel industry, lost her job, forcing the family to survive on fixed-term deposits. After fighting for six months, Vivek returned to full-time employment. “Covid-19 was like a tsunami. All of my plans were ruined and while Mediclaim helped to some extent, after six months I also had to settle for a smaller amount. Now I have to make up for everything I lost and my wife’s loss of income, ”he complains. Covid-19 has messed up the financial goals of many people like Vivek and ruined the dreams of early retirement.
“Nobody had imagined a chaos like Covid-19. It has posed unprecedented financial challenges and derailed people’s retirement plans. So many of my customers have to withdraw from their pension fund (PF) and pension fund after losing their job, despite decent financial instruments. Even those who have their job intact work with a lower salary and financial insecurity. They are postponing new purchases to make up for the loss, ”said Rakesh Malhotra, a personal financial advisor based out of Mumbai.
When the second wave hit, about 22.7 million jobs were destroyed in just two months, which was among the worst hits according to CMIE data and service sectors such as tourism, hospitality and airlines. According to official figures, the EPFO office closed 71.01.929 accounts between April and December 2020, up from 66.66.563 in the same period of 2019. Aside from the IT and pharmaceutical sectors, companies resorted to wage cuts, layoffs and freezes on new hires. This, coupled with the prevailing high inflation, has displaced many families from the middle class.
In view of the financial difficulties, the Employee Provident Fund Organization (EPFO) allowed its members to make another withdrawal from the EPF account as a non-refundable advance. This was done to help citizens amid the renewed Covid attack. As of June 1, EPFO has paid more than 76.31 lakh of Covid-19 upfront claims for a total of Rs 18,698.15 billion.
Keep it up
It’s not that the center didn’t offer financial help, but most of the stimulus packages have been in the form of soft loans, which experts say are insufficient to boost personal consumption. Although the state has given some aid, there are restrictions. In such uncertain times, targets need to be readjusted to prepare for aftershocks. Experts say the key is choosing the right tool and making sure enough
Insurance coverage and a good emergency corpus.
Manage emergency funds
Create an emergency fund that can be up to six months’ worth of expenses. Keep this money either in a savings account or in cash that can be easily accessed in an emergency. “Do you really need to change your car or go on an exotic vacation? In any case, indulge yourself if you have managed an emergency fund equivalent to a monthly financial commitment of six months. The emergency fund is usually missing in the financial goal. Post-Covid this is an important finding so that you have enough to protect your family from financial shocks, ”added Malhotra.
Get adequate insurance
Your financial portfolio should have adequate life and health insurance coverage. While health insurance covers your hospital bills, life insurance ensures that those dependent on you do not get into financial hardship while you are away. For life insurance, you need a plan with a high amount of insurance. People often buy ULIP, or endowment insurance, on behalf of an insurance company, but none of these products offer adequate life protection. As for health, make sure that every family member is covered by either a family floater plan or individual policies.
Diversify, diversify, diversify
“Whatever the case, you have to realign your financial goals to adapt to the post-Covid world. But traditional wisdom still prevails. Diversity, diversify and diversify, with a mix of short and long term financial instruments. Despite all the negative reports, insurance is a must as it offers some protection
at least, ”said Sanjay Jain, an asset manager. He also points out that if an investor is flexible enough, he can make up for the losses.