Why ULIP mis-selling has become rampant ?

Meet Khushali Pandit, age 32, an enthusiastic and adventurous person who loves to travel. By nature, she is a people person; she finds her happiness in helping others. Not to undermine at the same time, she is a very determined and strong-willed person.

But a few months back, everything changed for her. The Covid-19 pandemic impacted each and every one of us, and she was not an exception. She lost her job during the pandemic and her finances tumbled consequently.

In those few months, there was no steady source of income for her, even being a freelance lecturer didn’t help her much financially. That said, she had to change her investment plans and start cost-cutting on her needs. “The worst part of the whole scenario is that no one knows how long the pandemic would last. In times like this wherein I have lost my job, the first thing I focused on staying afloat on some emergency funds and fixed deposits,” said Khushali.

In the month of April, Khushali got a new opportunity that was her kind of dream job. Today she is back to the work culture, proudly working as a research fellow, manufacturing, and quality assurance associate at Tata Memorial Center.

How many of us can resonate with the story of Khushali today? Mostly all of us have gone through something or the other in the last one year, and some are still impacted by it every day.

Some people had to leave work due to Covid-19 related deaths to morally support their family, and some people were just handed a pink slip and shown the exit even after working for 15 years. Some companies had to shut down their businesses because of the dwindling revenues amid lockdowns and mobility curbs.

Financial planning

The pandemic taught us that no matter what is the current scenario, some situations would always be out of our hands no matter how hard we try, even if want to control those situations, especially the one which involves our money. During such situations, morally, as much as hard it gets to keep motivated oneself it gets equally difficult to think of a strategy to sort out a financial crisis.  That’s exactly what Khushali did. She mustered up the courage and started sorting out her financial plans by reviewing her portfolio and taking a count of what investments she has to survive.

“It is and will always be very important as my planning of saving money in fixed deposits helped me in times of emergency. Go for systematic investment plans (SIPs), go for FDs; any type of financial planning is good planning, especially in scenarios like this wherein we have no idea how long this will last,” said Khushali, who just celebrated her birthday on 19 July 2021. While becoming a year wiser, she reminded herself that no matter how old you get, a challenge can strike anytime to anyone of us.

A little courage and a good strategy in place can go a long way to come out of that financial hole. “An experience can teach one so much than at being at any age. Take the help of a financial planner if you need to. Coming out of that time will make you yourself proud,” remembered Khushali, who has now got a great sense of achievement in her struggles and where she is today.

If, as an individual, you are going through or gone through some financial difficulties, it is very important that you practise prudent money management until you find a new job and organise your finances.

Considering the ongoing second wave of Covid-19, the situation still remains gloomy when it comes to the job market. Let’s get into some specific ideas that can assist you in navigating the layoff period:

Reduce expenses

The current situation demands to spend solely on necessities and forego desires. You must alter your lifestyle and eliminate excessive spending.

Every penny counts during the layoff period, which is why it is critical to create and adhere to a budget. Avoid extravagant purchases and, most importantly, keep track of your expenditures. Today, numerous online apps are available to assist you in creating a budget that meets your basic necessities.

Avoid new loans

Obtaining a loan while not having an active source of income is a formula for catastrophe. With employment losses, the market is swamped with several loan offerings that you may get in a few clicks. However, keep in mind that these loans contain an excessively high-interest rate, making repayment difficult.

Additionally, defaulting on EMIs can significantly damage your credit score, impairing your ability to obtain future loans if the need arises.

Liquidate part of your investments to settle existing obligations and prevent incurring further debt that could irreparably damage your finances. If you are unable to pay, speak with your lender to work out a payment plan.

Purchases of significant value should be deferred

Discretionary expenses are a no-no when there is no active income coming in. The forthcoming holiday season will feature several discounts and profitable bargains. However, it is advisable to avoid them as much as possible.

Instant satisfaction is a significant contributor to excessive spending, which may be disastrous, especially during these difficult economic times. Avoid using your emergency fund to purchase items that you can live without since this will quickly lead to a debt trap.

Re-evaluation of your investment portfolio

This is another critical part of money management, even more so if you are unemployed. Determine whether you can suspend part of your investments and use the money to meet immediate necessities. For instance, most mutual fund houses have started offering a one to three-month pause option for systematic investment strategies.

This option enables you to continue investing in mutual funds without redeeming them and forfeiting any earnings. Additionally, adjust your total portfolio in a way that allows you to navigate tumultuous waters with ease. Avoid instruments that you are unfamiliar with and, if necessary, seek professional assistance like financial advisors and wealth management firms.

Manage your emergency fund wisely

The primary purpose of an emergency fund is to provide financial assistance in the event of an emergency. Avoid squandering the fund on wants and start contributing towards it whenever you return back to work.

Use only a portion of your funds at a time. For instance, if you have redeemed a fixed deposit, do not immediately redeem your mutual funds. Maintain an open mind and maximise the use of your emergency corpus when coping with the situation.

Endnote

While these tactics can significantly ease financial stress, it is critical to circulate your resume among peers and establish connections with possible recruiters. Additionally, use this time to improve your skills, which will enable you to add more value to your next employer.