By Ashish Modani
Post-Covid19 life would be very different. Be it your social, economic, political… nothing is going to remain the same. Government policies would change, policies of companies would change, and even household rules would see a lot of changes. This will be the new normal – at least for a very long time. Frankly speaking, I think 70 will be the new 100.
Let me explain: what was valued earlier at 100, would get revalued at 70. In other words, the world is now valued at 70. It was valued at 100 before the coronavirus pandemic hit the globe.
– Return from businesses would go down 30%
– salaries to employees will go down 30%
– Interest rates on FD will go down 30%
– rentals would be down 30%
– price of real estate will go down 30%
– return from equities over long run would go down 30%
– Your & mine expenses would go down 30%
The exact percentage may vary, but mostly the consumption in this world will go down around 30%. Today our expenses are divided among need-based expenses (non-discretionary) and want-based ones (discretionary). Having food at home is a need, but going out to a restaurant to eat is a want. The world will see a huge fall in discretionary expenses. They will rise only after a long period – a huge fall, followed by stagnation, and only when Covid 19 gets erased from people’s memory, such expenses will go up.
Today, most boardroom discussions revolve around cutting costs and reducing the head counts. As many businesses, especially in SMEs and MSMEs, are on the brink of closure and many may file bankruptcies; this all will lead to further slowdown in the economy.
What changes should you make in your personal finance:
1. Rather than reducing your SIP, try to reduce your discretionary expenses.
2. Create emergency funds with liquid funds or fixed deposits. Emergency funds should be at least 8-12 months of your overall expenses including EMIs
3. Track your expenses and make a budget. Earlier, not much heed was paid to budgets.
4. Negotiate expenses – whether it is with your Bbankers for EMIs or landlords for rentals.
Ashish Modani is the founder of SLA Financial Solutions, a wealth management firm, based in Jaipur