History stands testimony to the fact that whenever mankind faced adversities they adapted itself to the challenges and impact caused by it. Just like the Great depression, Dot-com bubble bust, and the 2008 financial crash in the past, Covid-19 pandemic is going to change the way people work and deal with the financial stress associated with it. We have to adapt to the “new normal” and face the challenges with optimism. Developing immunity against the virus & against its adverse impact on our financial well-being is the need of hour. In this article we elaborate on 10 tips to deal with financial stress & job loss due to Covid 19.
10 tips to deal with financial stress & job loss due to Covid 19
First, it is time for a reality check:–
Here’s a look at the present scenario and immediate future
The global economy as well as the Indian economy will continue to be significantly impacted if the lockdown caused by Covid 19 lasts longer. Banks and financial institutions will be under immense pressure as the fear of NPAs, insolvency and bankruptcies increase multifold. Businesses will be impacted as the government will focus on meeting the hyper demand for essential goods while non-essential businesses will focus on recovering outstanding money due from debtors. However, there are certain sectors and businesses that will benefit while others will be adversely affected.
Sectors which shall be adversely impacted are as follows:-
- Apparel & textile
- Non-Food Retail Chain
- Global shipping business
- Building, Construction & Real Estate
Sectors which may offer growth possibilities are as follows:-
- Digital and internet economy
- Ed-tech and online education
- Online skill development
- Online groceries
- Digital content
- FMCG & food based retail chains
- Speciality chemical
All big- ticket items like real estate/ luxury products will face problems in the next 6 to 8 months. Further, anything which involves personal interaction will suffer.
The lockdown has harshly impacted the Indian corporates as they are facing acute revenue crunch. Almost every day one company or other is announcing downsizing, layoffs, and salary cuts.
The centre for Monitoring Indian Economy (CMIE) estimated that 122 million people lost their jobs in April 2020. According to (CMIE), the Covid-19 crisis has pushed up the unemployment rate in urban India from 7% in mid-March to more than 27% in May. Almost 75% of daily- wage earners and small traders have lost their jobs. Sectors like hospitality, aviation, travel and tourism are amongst the worst impacted.
Action plan on how to deal with financial crisis and job loss due to COVID-19?
First of all, we definitely need to believe in the popular quote “when the going gets tough, the tough gets going”. Job losses and financial crisis can wreck one’s life because of the lack of security from a regular income. Liabilities in the form of Loan EMI can be a big burden.
The Reserve bank of India in April 2020 has directed all banks & NBFCs to offer a three –month moratorium on loan repayments which has been further extended by another three months till august. Also, the Modi government economic package may help in rebooting the economy.
Although the relaxation provided by the institutions might be helpful, much can be done at personal level to deal with the crisis. Here are the 10 things on how to deal with financial stress & job loss due to COVID-19:-
1. Debt consolidation using gold Loans
If possible, you may use the power of jewellery lying idle at home. Interest rate on gold loan is lower than personal loan. It would be a great idea to take a top-up loan to maintain liquidity. Also, you would notice the price of gold has increased substantially, that would further help in getting loans at lower rates.
2. Prioritize and foreclose expensive debt
A high-cost loan like credit card debt should be paid at the earliest. Don’t get lured by the moratorium on credit card or personal loan repayments. Interest rate for credit card is 24-48% per annum. Lured by the moratorium if you don’t pay for 2-3 months, it would be increase to 72-144% p.a. effectively.
One good way is to get the outstanding amount converted into easy instalments where the interest charged is 18-24%. This would still be cheaper than what a credit card rollover would cost.
3. Avoid pre-paying low cost debt
In normal times we try to prepay long –term debt like home loan and education loan with any surplus money we get but these are not normal times so using the compensation received with the pink slip makes no sense. The retrenched person should not hurry to foreclose low-cost loans. The interest rate on education loan is 10- 14% and on home loan is only 7-9% plus the interest is eligible for deduction up to Rs 2 lakhs under section 24. Surplus money received as compensation for the retrenched person should be used wisely. So, pay only when the EMI is due. No need to hurry. You may avail moratorium for short period on low cost debt if no other option seems possible.
4. Maintain a good credit score and do not go for several loan inquiries
Too much of borrowing and several inquiries for loan from many lenders will have adverse impact on your credit score.
5. Don’t be lured by stocks if you cannot hold the investment for at-least 5 years
Refrain from investing in stocks just because of mouth-watering valuation. Stocks are risky assets for short term gains and it is not advisable to risk the capital that a retrenched person possesses.
6. Conserve cash
Lockdown has taught us to enjoy simple lifestyle. Unnecessary expenses like club membership, useless subscription to TV channels etc. should be done away with.
7. Up skill and re-skill
Employers are still hiring for several skill sets. Skills like coding, UI/UX design, digital marketing, photography etc. are witnessing increase in demand. Many e-learning platforms are offering free courses on a temporary basis.
8. Seek support from placement services
Contact your HR department & leverage the connected agencies and job consultants to benefit from professional connections.
9. Take up freelancing roles
Be open to freelancing roles and projects which could add to the resume. Sectors like IT, financial services, advertising, e-commerce, online content development, digital marketing, data entry etc. are open for freelancing roles.
10. Seek therapy sessions for mental health issues
Online counselling and therapy sessions are available at nominal costs for those dealing with anxiety and depression due to job cuts.
A few important changes in your lifestyle and attitude towards a challenge like COVID-19 can shape you for long term success. Leverage the lockdown time to plan & manage your finances while adopting a healthy lifestyle. This can be of huge relief at this adverse time and help you sail through.
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This article is authored by Nupur Verma. She is an active blogger and writes about topics such as financial planning, investments and wealth management.