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Managing personal finances during COVID-19

  • H.M. Tarikul Kamrul 

In a lazy afternoon, Mr. Ashraf is lying on his bed by the window and enjoying the rain outside. He is thinking of the mischief he has to face of commuting back from workplace to home, in such a heavy rainy day. However, it’s not a challenge right now because he doesn’t need to go to the office right now due to Corona Lock down. He is working as a mid-level professional in a Travel Agency but right now the company’s all kind of operation is stopped. The company has paid March Salary but he is not sure of getting the April month salary and also the Eid Bonus, as the company is not earning any revenue for the last 2 months. Also, refunds need to made for many previous ticket sales. His financial situation is also very tight right now. He needs to pay the house rent, school tuition fees of his only daughter and also need to buy the daily essentials. On top of that, he has EMI to pay for a personal bank loan and also have a good amount of credit card dues as well. The situation looks very gloomy. He has some savings but that’s not going to help after May. If the company starts laying off employees, he will be in big problem along with his 5 members family. Mr. Ashraf is regretting of not controlling his expenses before COVID-19 and saving enough money for tough days. Right now, he needs to have a solution for managing his personal finance.

Are you finding this story similar to yourself? Well, many of us will do. Some of us might be better-off then Mr. Ashraf but most of us are in a similar situation like him or even in a worsened situation. Some might have lost their regular job during COVID-19. Some were un-employed before COVID-19 and was trying to find out a job in the market but right now it’s near to impossible to get a new job. No one knows when we will get rid of this COVID-19 pandemic but we need to stay strong and fight with the situation. The most important planning what we need to make right now is personal financial planning. Is it for 1 month or 2 months.. !! Thinking things will get normal. Actually, no one knows what will be the exact new normal and when it will get finished. Many things will change in the coming days permanently which will bring much more uncertainty. Lots of industry will vanish. Lots of jobs will vanish permanently. So it’s better to plan for the rest of the year or maybe for the next 1 year.

We will discuss here 10 best ways of planning and managing our personal finances right at this moment, so that we can stand strong during COVID-19 and Post COVID-19 time.

  1. Categorize your expenditure:

The first step is to categorize your expenses in 3 broad categories. Number 1 is the Essentials, like the groceries, the utilities, house rent, service charges, school tuition fees, other educations fees, your internet bills etc. These are bare minimum costs which you need to spend every month. Number 2 is all the Debts. For the EMIs of your car loan, house loan, personal loans, credit card debts, or any personal level debt, you need to list down all the debts you have to manage and need regular payments. Number 3 is the Discretionary or Optional cost. The Attire and fashion items you usually buy, the dine-out options, online shopping, online food delivery, new electronics item, new furniture or new mobile device, new home stuffs, or any non-essential consumption (i.e. Tobacco product, Travel), etc. It is not your bare minimum requirement and we can always decide to buy out these stuffs or not. So your first task is to list down all the expenses in each of these three broad categories.

  1. Managing the Bare Essential Cost:

Now you have made the list of essential products and services you need. Expand the requirements up to December month and sum up the total expenses. You will get the total essential bare minimum cash you need to run your family till December. This is the amount of money you need in the next 7 to 8 months’ time. Now, try to look into each of the item list in this category. If you can manage to save some amount at some point in time in the year, please do it. Discuss with your family and take their consensus as well on your plan. Seek ideas from them as well for cutting costs and incorporate them as well in your plan so that you get all your family members support on your planning. If you can save a 10% cost from your bare essential items in the next 1 year, you have made a big saving already.

  1. Managing all the Debts:

Now come to the second category of cost which is ‘Managing’ all the debts. Talk to your banks and see if you can delay the EMI payments by some months. Few banks have already offered this option to delay the EMI payment. Also, discuss the same with your credit card providers. Round the year, they have lots of offer of converting the outstanding amount into EMI amount with less interest rate. Avail those offers right now and also delay the payments as well. Now, many of you will think that the interest will go up if we just delay the payments, we need to pay back a higher amount to the bank. If you have enough in cash-flow to pay all these EMI and Credit card payments, then you don’t need to avail these or follow these ideas. Here, it is strongly recommended for the persons who have a shortage of cash inflow and in a difficult situation to manage personal finance. So for them, this is the best idea to delay the payments. As for any company, cash flow is the most important financial factor, and for a person it is also the most important factor. To manage your cash flow and expenses, this is the best time to delay the payments of EMI and Cards or any other personal debt to anyone. Govt. has also directed all the banks not to charge any penalty or other associated cost due to delay card payments. So, take advantage of these options, to improve your cash flow condition.

  1. Dealing with Discretionary and Optional Items:

These are the list of items, which are not essential for you and your family right now. There is a thin line between these discretionary items and essential items. Now, you need new clothes as an essential need to do your office or you need a new shoe as the old one is not possible to use anymore, then all these stuffs become essential. However, you have several shoes but still, you want to buy another new one or you have a workable Smartphone device but wish to upgrade with a new one, that’s become the discretionary unnecessary items. So, you take the decision, that which is the stuffs, is your discretionary items, which you can decide not to buy or to buy. Easily you can reduce a lot of stuff, which you should not require in the next one year. This principle is for all of us. Whether we have a good income even during this pandemic, you should also make this list and remove the items from your buying list. You were planning to change your TV, don’t change now. You were planning to buy a new big refrigerator, don’t buy it now. You had an abroad or local travel plan, don’t do it now. Do it later. You smoke 10 cigarettes a day, reduce it, or completely avoid it, You are saving 100-200 taka per day by just avoiding this. You have home internet and staying at home all day, then don’t buy out mobile data packs. You have a Netflix subscription, now share this with your friends and share the monthly payment as well. Stop all such subscriptions, which you are not consuming. Don’t go for expensive coffee, make your coffee. Don’t buy any luxury or fashionable or expensive items for next 1 year, if it’s not essential. Each taka you save is going to help you and your family and you must believe that all such effort makes a big difference. We need to continue this practice for the next 1 year by everyone.

  1. Plan the Cash inflow of Next 1 year:

Now you have listed down all kinds of cost and expenses for the next 1 year, it’s time to look at your earnings and cash-inflow. You have a job in a sustainable industry; calculate the salary, bonuses, and all cash savings. You have a job but the industry is not in good shape, consider 50% of your salary and bonuses for the next 1 year and also the cash savings you have. You need to be ready that, there might be layoff in the coming days and your salary is not guaranteed for the whole year. You don’t have a job right now consider your cash savings and find out the gap amount. In each case you need to focus on the total cash-in-flow for this year and the total cash-out (expenses). If you have higher cash-in-flow, you are better off and do save that amount for the future. Please don’t jump into spending money on unnecessary discretionary items. That amount will help you or it might help some other in your community. If you have a gap of cash-inflow compare to total cash-outflow, then you need to plan for your coming days to increase your earning sources and managing the cost, we will discuss on the ways to manage the situation in below points.

  1. Improve Your Skill to Increase your Passive Income:

Learn something that’s going to give you quick earnings. There is no right age to learn new skills. In the world of INTRAPRENUER, utilize the online media to improve your skills. Video editing, Digital marketing, Web site designing, programming language, UI/UX design skills are the few things, through which you can start earning. Whether you have a job or not or whether your cash inflow is higher or lower than the cash-outflow, you need to be serious about your passive income generation. This is important for all. Don’t seat idle and watch the series on Netflix, TVs, and YouTube for the whole day. Learn new things and start earning. This is the best time to do that. If your cash-inflow has a shortage, this is the mandatory thing for you. Start right now. Stop reading the rest of this article and start learning new skills now.

  1. Seek Help:

You don’t have a job; You don’t have savings. There is a huge gap between your expenses and earnings right now and for the next year. Don’t be shy right now. Seek help from your friends, your family members. Call every contact of your professional network, and inform them that you need to restart; you need a job urgently. So that once COVID-19 situation improves, you remain in their top of mind to get the job. Ask for monetary help from your family members and friends. Right now, all will understand the situation. Some of them will surely help you during this tough time. Don’t feel bad or shy. Your survival is the most important thing right now. Once you recover your financial crisis, do consider to pay back the amount to them. Check whether you have any disposable/revenue-generating assets (paddy field, ponds, livestock firms etc.) in your hometown or in the village. You can utilize those resources as well during this time to have some additional earning to fill up the gap.

  1. Do your negotiations and bargains in every purchase:

In our corporate procurement and buying department we do a competitive survey of price and other terms, while sourcing materials. For your purchase, replicate the same process. Yes, it might not sound good to all, but you need to save from wherever you can in your every purchase. So do your basic market survey before buying each essential product or service and take the best options. Do check offers, deals given by the traders and merchants. Ask for discounts on any available schemes. During this tough moment we have to do this basic bargain. You might not get any discount or offer in every case but surely you can save some from some of the deals.

  1. Avoid Online Shopping and Build Your Savings:

This is the wrong thing to do, as this home lock-down will increase our online consumption. Online purchase or consumption is required for essential purchases but not for the luxury items or the discretionary ones. Studies suggest that frustration or anxiety increases unnecessary buy-out in Online space. So don’t spend unnecessary online items. Rather, you keep and save that money. Build your savings. Savings will be your lifeline in any difficult situation. Our Post COVID Impact will stay for the next 100 years and many jobs will never come back after it. So preparing for the Post COVID situation is the best proactive thing that you can do. So keep hold of your money, to have the lifeline in the future.

  1. Be generous:

As you know, the economy is running by the mass general people’s hard work, and through their massive consumption. So helping them out during this COVID-19 will help us to restore the economy quickly. If you have some additional amount of money and savings after paying out your all Essentials and Debts expenses, don’t go for buying out optional items and expensive things. Rather, help out others if you have additional money. Help your friends & family members during this tough time. Donate money in good trusted social organizations and govt. bodies. This will again come back to our economy and will help you back in unexpected ways.

Like Mr. Ashraf, we all need financial planning for the next few months, a year, or for a couple of years. This is not the time to worry about the COVID-19 situation. Rather, it’s time to take action immediately. Face the challenges with proper planning. Ensure support from others and do extend support to others as well. It’s the time to Stand strong; Stand with others to manage our personal finances as well holding up the overall economy of our county.

 

The writer is a Chief Marketing Officer at Link3 Technologies Ltd.

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