Five Learnings from Demonetisation - MYREALITY.In, Real Estate, Share Market, Mutual Fund, Insurance
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Saturday, December 03, 2016

Five Learnings from Demonetisation

Five Learnings from Demonetisation

Though the exercise is unlikely to be repeated any time soon, demonetisation offers takeaways that should form the cornerstone of your financial strategy.

1. Do not wait for a crunch to budget or spend wisely..!

The first learning should also be the mainstay of your financial plan: budget and save before you spend. 

In the past few days, you have been forced to prioritise, paying first for essentials like investments, bills and premiums, before making discretionary expenses, and totally cutting out on frivolous or unnecessary purchases.

Though you do not need to resort to such extremes in the normal course, make sure you have a budget in place to regulate your saving and spending.

2. Do not hold too much cash, invest it..!

While it is advisable to keep 3 to 6 months' expenses as a contingency fund in the form of accessible cash, this should not be kept at home but invested in short-term debt or liquid funds, or / sweep-in saving accounts linked to fixed deposits.

By holding cash, you are eroding the purchasing power of money as you will be able to buy fewer things with the same amount a few years down the line.
You are also letting go of the higher returns you could have earned if you had invested it in, say, equity, for long-term goals.

3. Do not change asset allocation in panic..!

Though investors have wisened up after the 2008 financial crisis, many have still rushed to gold and debt for safety now. Remember that asset allocation is a function only of your age, risk appetite, shortand long-term needs and proximity to goals.

You should rebalance from time to time to retain the desired asset allocation, but don't risk your investments by reacting to short-term aberrations.

4. Keep pace with technology to manage finances..!

Even as people are rushing to download mobile wallets now, the clear learning is that it is critical to keep track of the latest tech upgrades.

The people who were already paying bills via net banking or mobile wallets, and using credit cards, did not suffer as much as those who weren't. It's high time to shift to mobile banking, downloading financial apps, and learning about online transfer of funds to not only increase ease of transaction, but also cut down on time and help save money.

5. Give your child a piggy bank..!

The children who had a piggy bank proved to be a boon for parents during the current crisis, with lower currency helping tide over the difficult time.

While minuscule savings can not be expected to help you during a bigger crisis, the habits of regular saving, discrete spending, making their own purchases and focused saving for small goals will inculcate financial discipline in kids.

They are not only likely to manage their finances better as adults but also handle crises with greater equanimity.

Src: Riju Mehta, ET 
Five Learnings from Demonetisation Reviewed by S Chitra on December 03, 2016 Rating: 5 Five Learnings from Demonetisation Though the exercise is unlikely to be repeated any time soon, demonetisation offers takeaways that ...

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