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A silver lining in the crisis

by Money Puzzle   ·  March 28, 2020   ·  

A silver lining in the crisis

by Money Puzzle   ·  March 28, 2020   ·  

It’s undoubtedly a hard time out there. However, its also true that every crisis has a silver lining. You have been forced to take a break, stop whatever you were doing and focus inward on yourself. If that’s not a silver lining, I don’t know what is?

There is another big positive that has come from this lockdown, with people sitting still in their homes. While businesses will lose income, some more than others, individuals will be able to save more.

Here is a quick look at your forced lock in savings.

  1. Save what you would otherwise spend in cafes, restaurants and entertainment. We know is this not a small amount for any of us. In a metro city, a movie outing for a family of four can easily run into ₹3000-4000 depending on what you eat and where you sit. Post movie dinner for the family can ring up ₹5,000-10,000, again depending on where and what you eat and drink. A simple coffee and ice cream date can result in your wallet leaking by ₹1500-2000. Imagine how much of this frivolous expenditure you can now save.
  2. Save what you would spend shopping. Apparel, skincare, shoes and toys; even if we want, we can’t slow down our spends on these things, one, because everything is so easily available and secondly, because spending on credit has become a habit. This time in the lockdown will make you do without the needless imported groceries like branded muesli and gouda cheese, which city dwellers have made daily use items.
  3. Save your membership fees and kids’ coaching class fees. A lot of us would have subscriptions, memberships and coaching fees paid already for a quarter or the entire year but clearly this will be unutilised. This means whenever things get back to normal, lessons and fees are already paid up.
  4. Save on fuel expenses and fuelling up your vices. You are not using your car or two-wheeler much at all, hence, no paying the exorbitant petrol and diesel costs. Some people have also realised they can do without their regular supply of cigarettes.

All this can add up to a significant amount in your monthly cashflows. At the end of the lockdown, whenever that happens, make a list of the things you can continue to do without. This will help make a more lasting impact on your cash flows. Maybe, the entertainment expenses can be reduced, smoking expenses can go out the window and so on.

But what will you do with all the excess cashflow – invest? Before you get there, think about the other uses. Here, have a look.

  1. Repay or prepay your outstanding credit card, personal loan and small consumer goods linked monthly interest payments. Clear the slate and repay all your small debts (barring car and housing loans).
  2. If you don’t already have one, then start building an emergency fund with all these forced savings. Do this only after you have cleared up your small debts.
  3. Once the two things above are done, only then put the excess of your savings to better use and start investing to create long term wealth.

Everything is not lost. This is a long battle against a unique enemy – COVID-19. But there are things you and I can do in our everyday lives to make this time a money positive outcome. With the Government and Reserve Bank of India doing what it takes to ease the cashflow burden on individuals and businesses, it’s now up to us to walk this last mile and put our forced savings to good use.

Use this time wisely – change for the better!

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