IS IT TIME TO RE-SET YOUR FINANCIAL PLAN ?

To say that the Covid-19 crisis has taken us by surprise would be an under-statement. It has severely affected economies, industries, businesses and even our daily lives. It has forced us to re-look at our priorities in life and make changes which we wouldn't have made otherwise. As things slowly come back to normalcy, we too have to go back to our lives with new learning's and wisdom of our recent experience.

The past months would have seen disruption to our monthly cash-flows and perhaps even a permanent impact on the same. In light of this and with new realization's we now need to reset our financial plans as we get back to our lives. In this article, we talk about this reset and what changes we may need to bring to our plans.

CHANGES NEEDED

Assessment of Life Style

The crisis has also made a long-lasting impact on our lifestyle and spending habits. Today Work From Home (WFH) is the norm and many companies have made favorable policies for WFH in the future. You need to assess if you really need to stay in prime localities at higher living costs if WFH option is available to you? A lot of employees have moved to their native places and are happy to work from the comfort of their homes with family while saving a lot of money. Even those who continue to live, a lot of savings is now possible with reduced spending on travel, holidays, entertainment, festivals, dining out and even shopping. In short, we have changed our lifestyle in the past, wouldn't it be great if we continue the same in the future?

Assessment of Finances

As a next step, let us take a step back now and assess the revised cash-flows from our business or employment with a fair assessment of our lifestyle changes. Old assumptions of growth and progress may or may not hold true now. As said, many industries, businesses and jobs have been impacted, especially in industries related to service, travel, leisure, entertainment, hotel, housing, etc where there is a direct impact. If you are a part of this industry, you may need to make the things work for you again or even look for better opportunities elsewhere. These big changes are hard to make, and it would also be hard to overcome financial shocks. To get going, we need to have a fresh look at everything and pen things down on paper.

Assessment of Your Needs /Goals

Before the crisis, we all would have dreamed of foreign holidays in exotic locations every couple of years. We would have desired residences close to city-centre's or our place of work. Well, we probably these needs and financial goals may no longer feature on our list. With remote working now possible, you can re-plan your house purchase goal and make significant changes in the same. You would have probably added a vehicle during the lock-down period or are planning for the same. In short, your list of financial objectives and goals would need a review /reset.

Contingency Planning

Contingency planning is now at the top of our minds. We have realized that emergencies can hit us at any point of time, and we need to have some liquid investments on our hands which we can dig into for a few months when needed. Contingency or Emergency funds should be at least adequate for 6 months of our living expenses.

Action Plan

With the final list of financial needs and goals ready, the action plan will involve rejigging of your portfolio and revised savings plan to meet them. We assume insurance will prominently figure in the big picture and adequate life, health, personal accident insurance would be on cards covering every family member. Perhaps, you may even go further ahead and think about sharing details of all your accounts, assets and liabilities with your trusted life partner or parents and even write your Will down, just for that extra peace of mind.

APPROACH TO FINANCES

The crisis has brought in a renewed focus on our finances and a sense of urgency amongst all of us. It has also shown us a mirror of the uncertainty we face in our lives. Obviously, all would be a waste if we do not change how we think, approach and manage our finances henceforth. Here are a few quick thoughts on what changes we may make …

• Realize the urgent need for decisions and course of action
• Adopt a probabilistic, flexible, range-based planning approach
• Need to learn and understand all concepts and topics on personal finances
• Need to be aggressive in saving and budgeting, cutting down on wasteful expenditures.
• Need to actively track finances/budgets in times of uncertainty

SURVIVAL OF THE FITTEST

The rule for the evolution of species is simple. It is not the greatest, biggest or the strongest that survives and win, but the ones who are the fittest and adapt fast to their environment. The recent crisis is a challenge to us but our human instincts to adapt fast and find opportunities for growth will surely keep us well. However, we need to act fast and take bold decisions, starting with putting things down on paper.