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Post Covid roadmap to restore financial wellness

With an average monthly salary of Rs 80,000, he left job with a fixed deposit of Rs 10 lakh, another 12 lakh in mutual fund and EMI of Rs 35,000 for his home and car loan.

Published: 02nd August 2021 05:35 AM  |   Last Updated: 02nd August 2021 05:35 AM   |  A+A-

All was going well till Covid-19 hit.

All was going well till Covid-19 hit. (Express Illustration)

Express News Service

NEW DELHI:  When Vivek Mathur (37) decided to quit his engineering job in May 2019, to take up 
freelance assignments and dedicate time for his hobby and family, his financial goals were well defined.

With an average monthly salary of Rs 80,000, he left job with a fixed deposit of Rs 10 lakh, another 12 lakh in mutual fund and EMI of Rs 35,000 for his home and car loan. His wife had a decent salary to take care of other joint expenses. All was going well till Covid-19 hit.

Despite paying a hefty hospital bill, he could not save his father and to add to his woes, he was slapped with a bill of Rs 18 lakh for treatment of his wife and both parents, with insurance companies paying only 60% of the amount. His assignments dried up and his wife who was in the hospitality industry lost her job, forcing the family to survive on fixed deposits. After struggling for six months, Vivek was back to full time job. “Covid-19 was like Tsunami. All my plans were shattered and while mediclaim helped to some extent, I was forced to settle for a lesser amount that too after six months. Now I have to make up for all I lost and also for the loss of income of my wife,” he laments. Covid-19 has disrupted the financial goals and ruined early retirement dreams of many people like Vivek.

“No one had imagined a  havoc like Covid-19. It has thrown up unprecedented  financial challenges and has derailed the retirement plans of people. So many of my clients, even with decent financial instruments, have to withdraw from their PF (provident fund) and retirement fund after losing their jobs. Even those who have their job intact, are working with lower salary and financial insecurity. They are postponing new purchases to make up for the loss,” Rakesh Malhotra, a Mumbai-based personal finance advisor said.

As the second wave hit, it wiped off about 22.7 million jobs in just two months, according to CMIE data and services sectors like tourism, hospitality, and airlines were among the worst hits. Going by the official numbers, the EPFO office closed as many as 71,01,929 accounts between April and December 2020 compared to 66,66,563 during the same period in 2019. Barring the IT and pharma sector, businesses resorted to salary cuts, firing and freezing fresh hiring. This coupled with prevailing high inflation has pushed many families out of the middle class.

Sensing the financial trouble, the Employee Provident Fund Organisation (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 onslaught. As on June 1, EPFO has settled more than 76.31 lakh Covid-19 advance claims thereby disbursing a total of Rs 18,698.15 crore.

Way forward
It is not that the Centre did not offer financial help, but most stimulus packages were in the form of soft credit, which experts feel is not enough to enhance personal consumption. While the state has been extending some help, it has limitations. In such uncertain times there is a need to readjust goals to be prepared for any aftershock. Experts say that the key is to pick the right instrument, ensuring enough 
insurance cover and having a good emergency corpus. 

Maintain emergency funds
Do create an emergency fund, which could be six-month worth of expenses. Either keep that money in a savings account or in liquid funds, which can be accessed easily in time of emergency. “Do you really need to change your car, or to go for an exotic holiday. Indulge by all means, if you have kept an emergency fund which is equivalent to six months of monthly financial commitment. Emergency fund is mostly missing from the financial goal. Post-Covid this is a crucial learning so that you have enough to protect your family from any financial shock,” Malhotra added.

Get sufficiently insured
Your financial portfolio should have both sufficient life and health insurance coverage. While health insurance takes care of your hospital bills, life insurance makes sure those dependent on you do not face financial distress in your absence. For life insurance, a plain vanilla term plan with a large sum assured is what you need. People often end up buying ULIP or endowment plans in the name of insurance, but neither of these products offer sufficient life cover. As for health, ensure each family member is covered either through a family floater plan or through individual policies.

Diversify, Diversify, Diversify
“Whatever is the case one has to realign their financial goals to adjust to the post Covid world. But still the traditional wisdom rules. Diversity, diversify and diversify, with a mix of both short and long term financial instruments. Despite all negative reports, insurance is a must as it gives some cover 
at least,” according to Sanjay Jain, a wealth manager. He further advised that if an investor is flexible enough, he/she can make up for the losses.


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Covid 19

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