In movies, when the apocalypse is over, the survivors generally resume their regular lives the very next day. There are, of course, bittersweet memories. But for the most part, life is back to normal. The pandemic is nothing less than our real-life experience of an apocalypse movie.
As we enter another leg of the lockdown, we eagerly wait to see what awaits from June 1. An extended lockdown only ensures a bigger hole in the nation's pockets. By now, we are used to this routine and anxiety. Just like a re-take while shooting or re-ball in cricket, we all wish if 2020 could be restarted.
There is anticipation for a few relaxations, but at the same time, we know it won’t come without restrictions. For one, we sure will not resume our regular life all-so-quickly. The real challenge stands beyond the lockdown. Bringing life back to normal is still a long way to go. We now have to learn to live in a post-pandemic world.
For starters, with the economy hitting a new low, and crude oil prices going into minus. One can only imagine the state of the world economy in the days to come. Goldman Sachs expects India to experience its deepest recession with a GDP contract by an annualised 45 per cent in the second quarter from the last three months.
To deal with the impact, we must learn to plan our finances.
With volatile market trends and increasing chances of a second wave or COVID-19, it is also important to ensure that our finances are used sustainably, to limit the risk factor.
The situation in the days to come
“Before the arrival of the pandemic coronavirus, the global economy was already experiencing turbulences. The situation has now been aggravated by demand, supply and liquidity stocks,” says Vinayak Kulkarni.
Along with 35 years of experience as a saving and investment counsellor, Kulkarni has written twelve books on investments and finance. He runs regular columns with prominent Marathi dailies and has previously worked on counselling assignments with TATA steel, Indian Navy, Oberoi Hotel and many more. He explains to Sakal Times the importance of financial planning at times like these, and how to go about it.
The millennial generation hasn’t seen unprecedented times like these. But now is not the time to be precarious, he tells us.
“We have to reconsider our lifestyle expenses and essential expenses. It is not the time to maintaining our standard of living. We must rather maintain our living standard. Try to keep more cash in hand, considering you have a stable income,” he suggests.
About loans, he says, “Whatever loans are there, which generally bare high rate of interest - try to repay those with existing sources of funds. Consecutively, try to pay at least 5 per cent of outstanding home loans every year.”
“In case of policies, concentrate on essential policies such as Mediclaim and Life insurance,” he adds.
“Also, as a continuous effort for your essential living expenses, ensure you have at least 6-9 months provisions. Continue to keep contingency funds until there is an improvement in recession.”
About investments
The declining cost of shares of many companies might seem like a good time to buy shares. But don’t be hasty. “For those who are willing to invest in the share market do invest in FMCG, banking and pharma companies, but only if you are well-versed with the market. If not, now is a good time to invest in mutual funds through SIP.”
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It is also natural for investors to be scared. But it is important to be patient and analyse the situation. "You are gaining units. At this point do not sell or buy in haste," he adds.
Explaining the complete situation, the advisor said, "Overall, avoid unnecessary and luxurious expenses and make provisions for contingency funds. The falling share market might look lucrative, but it is best to avoid buying right now. Even if we become corona free, it has set in a recession on a global level which might take up to three years to deal with.”
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Stressing on the importance of investing in mutual funds, Dhananjay Phatak an investment counsellor said, “Since the market is currently running at low points, you have the opportunity to invest in diversified equity funds. These diversified equity funds cover most sectors.”
“Also, the fund manager has the opportunity to buy more funds at low rates. So, when the market recovers, the returns are higher,” he added.
With 13 years of experience in investment counselling, Phatak, the director of Wealth Tracker, is well versed with the market trends. He suggests that now is the time to plan your finances well.
Speaking about entrepreneurship, he says, "With tremendous support from the government for the micro, small and medium enterprise (MSME) sector right now seems to be a good time for entrepreneurship. The governments initiative to support local businesses makes the market conducive for indigenous business."
“If you are looking at entrepreneurship or investment, due to the ongoing COVID19, pharma is a good sector to invest in – both medicines making companies and also medical equipment,” he says.
“Banking and finance sectors are also expected to do well in the coming days owing to the increased liquidity. Technology and education are also booming sectors. We have seen in the last few days that technology has come to our rescue and has been effective in supporting the lockdown. Also looking at the future of education, digital education could do well,” he adds.
As expected, he suggests that now is a good time to steer away from the hotel industry and tourism.
In special advice for the elderly, Phatak says that in older age it is better to be more in debt and less in equity.
“The basis of equity is higher the risk higher the profit. But with old age the risk-taking capacity is low. So, it is better to invest in a liquid fund or fixed deposits where the risk is lower,” he explains. “With liquid funds, money is available readily. So, you can have your funds at your disposal, ready to be used when you need it.”
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With the government announcing stimulus packages, we can hope to see a better market situation in the coming days. Needless to say, a well-planned financial plan can help you get through a difficult time.
An effective way to increase cash flow could be to stop retirement fund temporarily. The key, of course, is to continue once the situation is under control. It is also important to pay bills promptly, so it's a lesser amount paid at one.
The simple formula to survive the post-lockdown period until the pandemic subsides is to ensure you have enough money. Invest in essential services and avoid extravagant expenses for the coming few months. These unprecedented times may not last long, but it is important to be prepared.
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