COVID-19 has impacted many aspects of our life including how we manage our finances. The past couple of years have seen the Indian economy burgeoning along with start-up scene flourishing. With big money coming from PEs and VCs, Indians were seen getting spoilt for choices along with getting used to buying almost nothing without a discount. The ease of getting things at home with a click of a button was a usual sight. In other words, instant gratification was starting to become an integral part of us. As they say, everything has a silver lining, the lockdown has taught us that how one needs to plan in advance rather than leave everything for the last minute. Because now we know that things will simply not be available at a click.
Such advanced planning is also expected to seep in when it comes to dealing with our finances. The regularity of income, salary hikes, big bonuses, easy availability of credit were some of the factors that defined the way one would spend money pre-COVID. People were seen taking loans for consumption rather than asset-building purposes. These included loans for expensive phones, traveling abroad, etc. With COVID impacting regularity of incomes and easy availability of credit, people are expected to now become much more conservative in their spending. Saving first and spending what is left will become a norm rather than spending first and saving what is left. The focus will be to spend on essentials rather than indulging in unnecessary expenses. In terms of their current expenses, people would regularly take stock of their monthly expenditure and try and wean off all not so necessary expenses. Conserving cash will become a priority. When planning for the future, people would want to maintain liquid savings in a way that could cover up for their expenses for a minimum of 6-8 months. Buying insurance, especially health and life insurance will also become an integral part of our financial planning.
Most of the points highlighted above take us back to the era of our parents and grandparents who would always tell us to save first and spend later. How well the current generation incorporates and imbibes such principles as a part of their financial lives will only be known with time.
Dr. Ripsy Bondia
Professor of Finance
Dr. Bondia is an assistant professor, finance at SOIL School of Business Design. She recently completed her FPM from MDI Gurgaon in the area of behavioral finance. She has an industry experience of 4 years where she worked with IL&FS and research unit of McKinsey & Co. She is a mother of two. She loves spending time with her family and likes reading about human behavior and it's role in equity investments.