Don’t let events like the covid pandemic ruin your finances


The pandemic, however, has taught some key lessons about the importance of following the basics of financial planning – creating an emergency fund, getting adequate health and life insurance, staying invested, no matter how volatile the market is. , and avoid borrowing to finance your lifestyle.

Sales of health and life insurance policies and individuals opting for the moratorium despite the additional costs show that many were not prepared.

“The events that can potentially destroy you financially rarely happen in a lifetime. But such an event can ruin family finances forever, ”said Arnav Pandya, founder of Moneyeduschool, an Ahmedabad-based financial education initiative.

It’s not that people don’t know the basics of financial planning, but, according to investment advisers, they don’t prioritize it. Here’s how you can implement the financial lessons of the pandemic.


Many borrowers opted for a moratorium even if they could repay the loan, said some bankers, who added that most people wanted to have funds in their bank account in an emergency.

It wasn’t as if these borrowers didn’t have assets to deal with emergencies. But monetizing those assets could have been a problem, the bankers said.

If someone loses their job and needs, say, ??6 lakh to cover the expenses of at least a year, they would not sell their house, which would be of a much higher value, to get the money. They can also have gold in the form of jewelry. But the shiny metal has emotional value.

In such cases, maintaining a rapidly accessible and easily liquidable emergency fund is therefore essential.

Just follow a few basic rules when saving for an emergency fund.

“The emergency fund should be able to cover at least 12 months of your expenses – the more, the better. Don’t chase returns under this. Parking money at a trusted bank, which pays around 4-6% interest on a savings account, works, ”said Melvin Joseph, investment advisor registered with the Securities Exchange Board of India (Sebi) and founder of Finvin Financial Planners.

Maintaining an emergency fund is much more important than investing. If you have insufficient emergency fund but have ongoing investments, you can temporarily stop them and redirect that money to the emergency fund.


There is no formula or rule of thumb for deciding the right amount of coverage for Medicare.

A health insurance policy of ??10 lakh at present would usually suffice. But if you go for a ??25 lakh of coverage, you will have to pay 35-53% more. For a 50-year-old, if a ??10 lakh of health insurance costs around ??20,000, the cost of a ??The cover of 25 lakh will come to ??26,000 to 27,000 per year.

In the case of life insurance, there are several ways to calculate the amount of coverage you need. One of these methods is income replacement value, in which an individual multiplies current income by the number of years remaining for retirement to arrive at coverage.

If your current annual income is ??12 lakh and you have 25 years left for your retirement, then your life insurance coverage should be ??3 crores (12,00,000 X 25).

Another method called the value of human life method takes into account your current age, your existing income, savings and loans, as well as the potential income you may have in the future. But, according to the rule of thumb of life insurance, your coverage should be at least 10 to 15 times your annual income.


On March 5 of last year, the benchmark S&P BSE Sensex was at 38,470.61. But in 18 days, on March 23, the index had corrected 32% as investors panicked amid the rapid spread of the pandemic.

From there, the index rallied and rallied to 52,154.13 on February 15 of this year. Since its lows in early 2020, the index had gained 100% in 11 months.

If you had panicked and sold your investments or stopped them due to the correction, you would have lost one of the greatest opportunities for wealth building in the past decade.

The best way to build long term wealth is to stick with your investments and ignore market movements.

“In addition to staying put, investors also need to stick to their asset allocation. When the markets were beaten in March, those who maintain asset allocation would have invested more in equities, ”Pandya said.


Some loans are necessary, such as home loans or student loans. But it is easy to fall into the trap of lifestyle finance loans as lenders offer them in attractive ways to attract potential borrowers.

When you go to a store to buy a durable consumer good like a refrigerator or an air conditioner, chances are you will get a zero interest loan.

To make it attractive, you will also get rebate or cash back if you go for a loan.

The same goes for online shopping. There are app-based loans that claim to work like a credit card, providing borrowers with a credit limit.

Avoid taking such loans for your lifestyle shopping. If the offer is too good to resist, go for it only if you have the funds to repay the loan within a month.

And finally, despite your best efforts, one thing can still fail you: the absence of a will. Without a will, there may be conflict in your family for the wealth you have created. Therefore, planning the distribution of your wealth after your death is as essential as creating it.

You can make a basic will from any online service provider such as, which is backed by National Securities Depository Ltd (NSDL), a government-owned entity.

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