News: Lockdown impacting your income? Do this now so that your future money goals are safe -04-05-2020
Updated On: May 04, 2020
Lockdown impacting your income? Do this now so that your future money goals are safe.
Incomes of many people, especially those who are self-employed, have been impacted due to the lockdown. To help you through these tough times, here is how you can cut down on current expenses so that your future goals are not at risk.
Atul is 36, a father of two and the sole earning member of his family. He been very careful with money and has set in place a savings and investment plan which he adheres to religiously. He first meets his savings target before any other expense.
Given this financial discipline, Atul is sure that he is well on track to meet all his financial goals. But the Covid-induced lockdown has dented his restaurant business and made it difficult for him to manage his expenses and savings. Should he cut down on his current expenditure so that his financial goals are not put at risk?
Atul seems to have put his present life at risk to secure his future. He is making the mistake of assuming that all important goals are in the future without considering the effect of cutting back on current essential requirements. His children need good education and exposure, his family’s health should not be compromised and he must not overlook the importance of some basic comfort and peace of mind for himself and his family.
Faced with a sudden income crunch, Atul’s concern is genuine. However, the problem may lie in the fact that he is saving too much for the future at the cost of his present. He should take another look at his savings targets and try to rationalise it, at least until he is able to innovate with his business and bring it back on track. For instance, instead of looking at a long retirement period for which he has to save for, he can consider the fact that he can be gainfully employed for 7-10 years even after retirement and supplement his retiral income. Again, a realistic look at his likely expenses in retirement may bring down the corpus required.
Similarly, he must consider the educational loans that will be available to meet some part of his children’s education and needs. Atul should also see if his funds can be invested to earn a higher return albeit with a little more risk. Since all his goals are more than 10 years away, he can afford to take some risks which in turn will bring down his savings targets and reduce pressure on his current finances.
Atul must also align his targets to his stage in life. While he would have been able to save a high percentage of his income when he was single, it may not be the same when he has a family to support and expenses are higher. Atul should cut back on his savings targets now, so that his current expenses are comfortably taken care of.
Hopefully, he will be able to align with the ‘new normal’, innovate with his business model and address the working capital issue. His income is likely to be back on track, if not increase, and he will be able to increase his savings again. Relooking at goal values and calibrating his savings to his income at this stage in life are the things that will help Atul.
