Hello everyone. Welcome to my blog. Year 2020 is about to end. Just a few days are left. Due to the pandemic scenario, this year was very challenging in terms of physical, mental and financial health. Many people lost their jobs, small businesses have shut down and people are still struggling with a cash crunch. There was so much stress & uncertainty. But in all this clutter, 2020 has offered us the chance to ‘learn’ Money lessons. To learn about the importance of Health which we often take it for granted. Most importantly, the importance of Money which we know but sometimes ignore.
Here, I would like to highlight that knowing the importance of money only in terms of earning or spending is not enough. You should learn how to protect it and invest it.
I believe there is no ‘Winning and Losing’. Either you can win in the situation or can learn from the situation.
So, in this blog, I am going to share with you my money lessons in 2020, “Why Money is Important”, “What are the benefits of Money” and points related to its rules.
Always have an Emergency fund:
1. In many industries/companies, people were not getting regular salary income or were getting reduced salaries in the ‘lock-down’ scenario. Financial transactions were interrupted. Cash flows were hampered. But, if you observe, in that situation also, few expenses were unavoidable such as groceries, insurance premiums, medical expenses, rent etc.
2. This pandemic situation was an ‘Emergency Situation’. You always need to be prepare yourself for any financial emergency in future. Hence, keep aside at least 6 months of your unavoidable expenses as an Emergency Fund. Invest that money in liquid form so that you can use it in the case of need.
According to me, this is one of the most important money lessons from 2020.
Always have adequate Health & Life Insurance
1. Our ‘Body’ is our soul mate throughout the lifespan. The way to maintain our body that we have got is to stay fit and healthy. Secondly, to insure it because some things are beyond our control and non-maintenance of this asset (Health) might be costlier than we think. We insure assets such as our home, car etc. Now, it’s time to take insurance of the lifelong asset ‘Health’ seriously. Please make sure that your Health Insurance Policy covers all family members & it is inclusive of COVID-19 cover.
2. Risk of life is the biggest risk in life. So, make sure that you have adequately insured it. Please remember that Life Insurance Policy is not for you, it is for your loved ones. So, avoid taking investment cum insurance plans and opt for ‘Term Cover’ which will offer your adequate amount in low cost.
Switch money from Equity to Debt when the Goal is near
1. You have seen how the Equity market crashed in the month of March 2020, almost by 40%. Almost all stocks were trading near their 52 weeks low.
2. Now, just imagine a situation where you are in need of the money in March 2020 and you have invested a considerable amount in equity markets or your any financial goal is due in that month. It is terrifying, right? Hence, always start shifting your money from equity to debt when your goal is approaching.
Your needs to limited, wants are not
1. People love to spend. We spend a lot of money on lifestyle, entertainment, dining out, shopping etc. But, during lock-down, we were stuck in homes. No shopping, dining out, no movies. But, still we were spending time with our families. Most people learned new skills. We spent only on “Necessities”.
2. You will agree that, in the last 6-7 months, we saved a lot of money which otherwise would have been spent on unnecessary stuff. Hence, your ‘Needs’ are very less, but ‘Wants’ are limitless. From this year 2020, learn the fact that you can save a lot of money if you curtail your wants which is not very difficult for you now.
After money lessons from 2020, let’s see 5 rules of Money.
Rules of Money:
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See you in next blog.