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Reduce expenses, maintain liquidity to sail through these pandemic times

Here are the top personal finance lessons that we must inculcate during these troubled times

May 12, 2021 / 10:02 AM IST

The COVID-19 pandemic has left several individuals jobless and many others working at reduced salaries. Business owners have witnessed a significant reduction in revenue while many others have had to shut down their businesses altogether. In any case, the unprecedented outbreak has been an eye-opener on the need for streamlining our personal finances. With a greater focus on how income is being spent, saved, or invested, here are the top personal finance lessons that people must inculcate during these troubled times.

Reduce expenses

The pandemic bore witness to a lot of panic buying of essentials at the outset. This was, however, futile since essentials were available throughout the lockdown as well. So, it goes to show that reducing expenses and not giving in to panic buying should be a rule of thumb during uncertain times. Making a budget that allows you to spend the bare minimum while still maintaining your preferred standard of living is important. Stick to this budget and you will be able to save more for the rainy day.

Also read: COVID-19 crisis: 5 ways to trim your expenses and free up cash in your budget now

Stay liquid for emergencies

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COVID-19 Vaccine

Frequently Asked Questions

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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That said, in order to stay afloat during crisis periods, you must also have enough liquidity to meet your daily requirements. While investing, exercise caution and use instruments that can be easily liquidated, should an emergency arise. Cash and cash equivalents such as liquid mutual funds can be your best bets in such a case. Do not forget to build your emergency fund, which definitely comes in handy if required. However, on the other hand, it is also important not to break long-term investments, since crisis periods are short-lived, but these investments will help you build wealth in the long run.

Borrow wisely

Lending apps have become very popular since they offer small-ticket loans with short-term repayment tenures, which can help out greatly if you are in a fix. However, make sure you are cautious and do not pick a micro-lending app that uses fraudulent means. Use legal lending apps that are registered with the RBI and have a listed websites. Companies that are registered with the RBI are required to follow regulatory guidelines, not just to abide by the rules but also because it is the best way to run the business. These lenders usually follow a strict set of guidelines, a code of conduct, in working with borrowers and ensuring the best possible experience for everyone.

Also read: COVID-19 Second Wave: 4 money mistakes to avoid during the pandemic

Maintain a healthy debt to income ratio

A tiny virus has created a huge gap in millions of individuals’ earnings. This, alone, is enough reason to ensure a debt to income ratio that is based on your current income and not future earning potential. If the pandemic has taught us anything, it is that you cannot count on the future – it can change at any time. Therefore, currently, the focus should be on balancing the debt and income, giving yourself some breathing room. Remember, the lower the debt to income ratio, the better your personal finances will be. With these pointers in mind, individuals at any level of income can manage their personal finance and sail through crisis periods, should they come.
Anil Pinapala is Founder & CEO of Vivifi India Finance
first published: May 12, 2021 10:02 am

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