WHAT COVID-19 TAUGHT US ON FINANCIAL PLANNING
The total world is still under COVID-19 lockdown. This has made a huge impact in everyone’s personal financial planning. Some changes have a positive impact and we will be looking into them.
The changes have made a predominant marker in everyone’s life on financial literacy.
Let us look into the major changes that happened between people, which is important in personal financial planning.
1. TERM INSURANCE:
In the last quarter (Q1’2020-21), LIC (Life Insurance Corporation) has registered a growth of 25.2% in personal insurance. In which Term Insurance holds 74% of the share. Source: Economic Times.
One of the fundamental of financial planning is Term Insurance. It has clearly seen that people are shifting their vision towards term than endowment insurance.
2. HEALTH INSURANCE:
The second most important factor of financial planning is Health Insurance. Mr. Sarbvir Singh, CEO of Policy bazaar has given an interview to economics times.
In which he has clearly stated that people have focused to buy comprehensive health plans. Since Comprehensive plans cover all kinds of diseases and even the upcoming diseases.
People have the focus to buying high premium between 30 lakhs to 1 Cr coverage for a year.
3. EMERGENCY FUNDS:
In the time of the pandemic, when almost a 10% increase in unemployment globally. People have come to know the advantage of emergency funds.
A survey conducted by financial-planning.com has stated, almost 36% of people have increased their focus on building an emergency source.
In our previous topics on emergency funds, we have clearly stated the purpose and how to grow the emergency fund. A minimum of a 6-month salary should be accumulated and should not be in the bank.
Invest the fund in liquid funds, where liquidity is high. Liquid funds offers an average 0f 7-8% return per year.
4. BEING MINIMALIST:
In the last 5 months, we all have changed to live with what we have. We all spend only on the most important NEEDS.
As an account of lockdown, people crowded only near retail stores and supermarkets for groceries, vegetables, and fruits.
No one crowded in front of the bike, car, or appliances showroom. People have cleared their mind about what is the most important.
No one bought a new home in this pandemic situation. Real Estate market has reported a 54% fall in 8 major cities of India in H1’2020.
In the last two quarters, people started to reduce their wants completely and added them into their savings.
5. IMPROVING SKILLS:
During the lockdown, the online courses market has grown by 21%. Many people have invested their time and energy to upgrade their skills.
The topmost courses sold are Artificial Intelligence, Machine Learning, Python, Azure DevOps, digital marketing, project management marketing and sales skills.
This is proving that people are ready to upgrade their skill sets. There are many offers for these courses. Both employees and students enrolled themselves
Upgrading the skill will give a stable position on the current job like promotions and increase in pay in later years.
This will eventually enhance in achieving their financial goals.
6. DEVELOPED SIDE HUSTLE:
During the lockdown, people found quality time with family. At the same time, an awareness of side hustle has born in the majority of people’s minds.
Many skilled people invested their skills over freelancing, internships, and also in some part-time jobs. This has brought them cash flow.
Some have started startups without any investments and having their skills as an investment.
A few youngsters of Sivagangi (District of Tamil Nadu), who returned native as jobless. With the help of their motorcycle, mobile phone, and internet as an investment, started groceries, and vegetable delivery services.
YouTube channels are increasing day by day. People telecast the videos on their strength areas. YouTube will be converting into a big passive income source.
A side hustle is one of the important parameters in financial planning. As extra income into the wallet of savings will make your financial freedom soon.
7. INVESTMENT TOWARDS EQUITY:
Almost 12.6 lakhs new DEMAT account has opened in the months of May and June.
Many Investors and Traders have started investing in the equity market. Traders use equity to earn some money which would support them.
Investors have started with the aim of creating their wealth.
Adding to this many people started investing in equity mutual funds. Index funds are one, which most investors are investing as major financial planner and advisors are preferring.
Systematic Investment Plan (SIP) has seen great growth in number in both mutual funds and in buying a share.
· A pandemic has taught us, what is the top priority in life than materialistic goods.
· Term and health insurance followed by emergency funds is given more focus.
· People have become to live with minimal and only plans the expenditure of NEEDS.
· Online courses enrollments are growing higher as people look upgrading their skills.
· Side hustle, YouTube and freelancing are increasing day by day as a source of income.
· Finally, many investors have landed on equity.