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The unlearnt financial lessons in COVID times…

The unthinkable has happened. We had always presumed that bad things cannot happen to us.  Words like pandemic, tsunami have got new meanings as they enter our lives with gay abandon. Suddenly death is knocking on our own doors rather than on doors of others.
In the last fifteen days, two of my known acquaintances, in the prime of their youth have passed away directly or indirectly impacted by Covid-19. What is left behind are shattered lives and livelihoods. One has bed-ridden elderly parents and other school going kids.
Many of us are now preparing to leave the secured environment of our home and start going to our offices and our business establishment. The new arguments are – ” priority of livelihoods over lives” and “learn to live with virus”.  We should however think whether these arguments hold good for us as well. Is the risk we are taking in venturing out worth the reward? As Sadhguru said in one of his webinar that the biggest achievement for anyone at this point of time would be to just stay alive and economic activity can follow. Wealth should not be accumulated at the cost of health. 
Let us look at the question again from financial angle —  Is the risk we are taking in venturing out worth the reward? On face of it this seems like a very complex question but actually it is not. We have to just broaden our horizon and look at the larger picture. On an average every individual has approximately 30 to 35 years of working life and the weight one year carries in this long period of working years is insignificant. 
Let us understand this with an example. Suppose a person at the age of 35 years has an earning potential of Rs 20 Lac. per annum. Calculations show he will potentially generate a wealth of approx. Rs 10 Cr. (in present value terms) in his remaining working life of 25 years. Thus this 12 months of current income is just 2% of his life time income. Will it make a significant difference if he does not earn for an year. Is it worth the risk?
Covid-19 has divided the world into two halves – one half comprises of those who “have” and other of those who “have not”. Former are the ones who have the right financial knowledge and who been consciously managing their money well. Latter are the ones who have been living an unconscious financial lives.  The “haves” have the luxury of treating this 12 month period as sabbatical from work and are focussing their lives on either something they love to do or upskilling themselves for better tomorrow. On the other hand the “have not” are facing issues on liquidity as their cash inflows are drying up and they are invested in illiquid assets. Some of these are having loans and other debts which is leading to large cash outflows in the form of EMI. And there are also some who have to pay rent for living in rented spaces. Finally the most challenged ones are those who have been living on current incomes month on month without creating reserves.
There are no surprises if majority of us find ourselves or our loved ones in any of the above challenging situation due to closed or minimal economic activity. This should really make us sit up and think hard – why an insignificant length of time (12 months) is creating mind boggling impact even after having many many years of working life behind us? Is this a happy situation to be in? What can be the remedy for this so that we are in a better frame when another such unthinkable happens in our lives. Is there any way to remove uncertainty in our financial lives?

A famous author once said – “Do something today that your future self will thank you for”  The “have nots” do not lack financial resources but lack wisdom and knowledge to leverage these financial resources to their advantage.  The role of inflation (devil) and compounding (an angel) has not been understood. Probably they need some guidance and handholding to be back on the track. They need a coach who can help them take charge of their financial lives. They need to become aware of their current financial situation- their assets & liabilities. Just as they work hard to earn their living they should work towards understanding their personal finances. They should move from passive savings to active investment. They will soon realize all this can be achieved through Financial Planning where a small shift in perspective will bring in windfall gains. As Benjamin Franklin said -” “If you fail to plan, you are planning to fail!”

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