Financial Wellness during Crises

The current pandemic has unleashed a host of crises in our day-to-day life, financial crisis being one of them. Salary cuts and layoffs have brought to fore one of the most neglected yet vital aspect of financial wellness i.e. proper Financial Management. The unpredictability and anxiety accompanying such challenging times have shaken the flimsy ground of financial security and independence. Having a decent source of income can no longer be equated to financial stability unless and until we learn to manoeuvre our needs and resources in such a way that they not only sustain our current lifestyle but also help us glide through difficult times smoothly. Hence, raising awareness about effective financial planning has now become more important than ever.

Effective Financial Planning isn’t just about planning one’s finances but it also reflects our own attitude towards preparedness for difficult times. However, it is still one of the most neglected aspects of Financial Management; this could be attributed to lack of awareness, interest and availability of well equipped and experienced financial planners or just sheer procrastination. Apart from that, half baked knowledge about financial instruments and bad financial decisions only aggravates the problem of poor financial planning and to explain it in detail; some of the examples are listed below: 

  • Dependence on friendly insurance agents for our financial planning needs
  • Misconception that tax planning is same as financial planning
  • Making new investments before paying off our existing loans and debts (liabilities) with higher interest rates
  •  Preference to EMIs over a SIP
  • Investing in stocks and shares for quick gain and not shying away from becoming stock trader even before becoming a knowledgeable investor
  • Approaching our family and friends for advice on investments and later regretting that decision
  • The perception that health insurance premium is a wasteful expenditure rather than savior of our wealth created over lifetime
  • The belief that insurance and investment is same
  • That Financial Planning is a onetime process rather than an ongoing activity

Good financial planning is a key to achieve our financial goals. Understanding the impact of growing inflation, proper risk profiling and asset allocation are an integral part. However, all this can be done only if we have a sound knowledge of financial planning and this brings me to the role that our universities and schools can play in making financial planning a critical part of our lives. I strongly believe that our curriculum needs to be upgraded to make financial planning an important subject so that our youth doesn’t waste their time and energy in making bad financial decisions and learn through hit and trial. This would also help them achieve their financial freedom early.

 The paycheck to paycheck lifestyle with dozens of EMIs and luxury expenses has become a norm amongst the younger generation, equipping them with right knowledge and guidance can go a long way in preparing them for uncertain times. They need to realize that maintaining an adequate emergency / contingency fund and saving for the retirement should start as soon as they receive their first paycheck, especially in a country like India where we still do not have a robust social security support system in place.

Having a financial plan helps you see the big picture and set long and short-term life goals which are a crucial step in mapping out a safe and secure financial future. When you have a financial plan, it’s easier to make financial decisions and stay on track to meet your goals. A Financial Planner can help you create specific strategies for future financial needs; building wealth and help you in the process of budgeting while analyzing the shortfalls and ultimately achieve your financial goals.

One of the silver linings which I see during Covid – 19 is that people who are financially stressed or affected will start taking financial planning seriously, which is certainly the need of the hour.

Let’s make being “financially stable “a new normal. Financial wellness is to wealth as physical wellness is to health. Let’s make our fight against this pandemic an opportunity to become prudent decision makers.

Sandeep Kumar

Certified Financial Planner (CFPCM)

  1. I have known Sandeep for some time now. Punching above its weight, he and his small team delivers an excellent…

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