On the eve of India’s 74th Independence Day, we look at how things have transformed for different age groups
Freedom means different things to different people, whether it is free-falling at the end of a bungee cord, deciding to retire early and travel the world, or having the means to support oneself without relying on others. But covid-19 has curbed many of the freedoms that we took for granted. While the country has entered the Unlock phases, many restrictions persist. For many, it has also taken away the sense of financial freedom, whether it is because of a sudden job loss or pay cut, or the bleak economic landscape.
Financial freedom, in itself, acquires different meaning for people ar various life stages and age groups. We look at three categories of people—the young professionals, the middle-aged workers in their 30s and 40s and the retirees—to understand how the pandemic has impacted their financial lives and the way they perceive financial freedom now.
For those graduating into a recession or just starting their careers, the pandemic can mean putting any plans of moving out and living independently on hold. For many young professionals who lived away from home for work, this has meant returning home to save on costs and be close to family. Any plans of pursuing higher education or committing to large expenses such as buying a car might also have to be postponed. “This is not the time to plan anything big or ambitious. One has to come to terms with plans being put on hold and just wait it out till the situation improves," said Shilpi Johri, certified financial planner and founder of Arthashastra Consulting.
For those in their 30s and 40s, the economic consequences of the pandemic has been harsher. With many losing their jobs or taking a pay cut, servicing home loans, paying children’s school fees and funding the myriad household expenses can take a huge toll. In such a scenario, over-reliance on your employer can be dangerous. “To be free is to make sure you have enough of an emergency fund to see you through income loss and adequate insurance other than what your employer provides," said Johri. She added that it makes sense to keep your options open professionally, as well as to keep re-skilling.
For retirees, if they had all their finances sorted out before the pandemic hit, it can tide them over this difficult period without having to worry about money. But according to Shweta Jain, CEO and founder, Investography, a financial planning firm, new retirees who started investing in equities recently could have taken a major hit. “I have a new client who booked losses of 30% in equities before consulting me. He had just retired and started investing in equities because he had the time and money for it. Now he is reconsidering his whole financial plan and trying to single out unnecessary spends, which he has never felt the need to do before," she said. Jain added that since cash flow from your job ceases after retirement, it’s very important to build a large enough corpus in reliable instruments that will keep your interest income steady. Creating an additional income source can also be helpful, but keep in mind that some options like rental income have become uncertain in covid-19 times. Also, given that the elderly are more at risk of succumbing to covid, having adequate health insurance is more important than ever.
As India celebrates its 74th Independence Day, we bring you the stories of three people at different stages of life, and tell you how the pandemic has affected their idea of financial freedom.
‘I am looking forward to living on my own’
Ankit Sharma, a 24-year-old associate software developer, moved back home within Bengaluru briefly before the pandemic as he switched to a new job at a startup. He had intended to move out again but covid-19 locked down the world.
“I had arranged for an apartment and found flatmates, but since the covid-19 pandemic hit, all of those plans had to be shelved. I’m currently living at home, and all my flatmates have also moved back to their home towns," said Sharma.
Luckily for him, the startup he works for has not been impacted by the covid-19 pandemic. “On the contrary, we now have more work than we can handle and are hiring new talent," he said. It has been a steep learning curve for Sharma ever since he joined the startup in November 2020.
Another of Sharma’s plans that he was forced to shelve because of the pandemic was to work for a few years before using his savings to fund his education abroad, but the pandemic has put paid to his plans for now.
“It’s mostly because of the financial uncertainty that comes with studying abroad and there not being a concrete time frame on when the pandemic might come under control or end. I don’t want to work hard and gain my financial freedom and then lose it by going abroad," he said.
Although Sharma’s job is secure and his industry is doing well, starting out during a financial crisis has defined the way he looks at financial security.
He is just planning to start investing in mutual funds through systematic investment plans (SIPs) and does not have any concrete long-term financial goals as of now, but eventually he wants to secure his future through adequate insurance and investments.
“Eventually I want to build up a large enough corpus and have adequate insurance and an emergency fund in place to feel financially secure. If I can cover myself to the best of my ability and don’t have to rely on my family for anything, I’ll feel that sense of financial freedom," he said. Being independent in all aspects is what he wants.
‘Job, income security matter most for me’
Shailesh Mohan Bajpai, 39, was an aggressive investor before the pandemic hit. The Singapore-based cybersecurity consultant had an investment strategy which involved chasing high returns from global equities. But around March, when the global markets started taking a hit, he was almost forced to reconsider his stance. “You start wondering if it would have been a better idea to just put your money in fixed deposits and gold," he said. Luckily for Bajpai, he has been able to recover the money he initially lost in the market.
Although Bajpai says that job loss is a concern, his sense of financial freedom comes primarily from his job and income that has been stable through the pandemic. “I have had the good fortune to have assurance from my employer that my job is safe, and I have every reason to believe them," said Bajpai. His wife Ambika, who works in the export industry, did see volatility in her sector, but she too had the reassurance of her employer that her job was secure.
The family, however, relies on the health insurance provided by Bajpai’s employer.
Bajpai doesn’t believe in structuring his investments. He saves as much as he can and invests in mutual funds, but he has not tied his investments to specific goals. Bajpai, whose daughter Sia is four years old, added that while his investment strategy had not completely changed due to the pandemic, he is being more watchful now. “Now that my losses have been recovered, I am looking to take out some money to safer and more liquid investments," he said.
Bajpai believes he will be able to provide for retirement just as he is doing for his present needs. That makes him feel financially unburdened and free.
Though Bajpai’s financial security has remained unhampered, he might be an exception. Financial planners warn against over-reliance on one’s employer for cash flows and insurance, especially in your 30s and 40s. In case of a job loss, you might find yourself without adequate savings or necessary insurance, which has been the case with many salaried employees recently.
‘I am more cautious about money now’
Dr D. Roy Pal, 65, is a Kolkata-based ophthalmologist, who retired from her position at a state government hospital three years ago, but she continued to see patients at her own clinic till the pandemic began. While Roy has the security of a steady pension from the government, she has certainly felt the pinch, with her additional income dwindling.
“I had never thought of the pension as particularly important since I had another income source. It would come in and automatically get invested as part of my corpus. But since covid-19 hit, I haven’t been able to see patients, and suddenly I’m very thankful for my pension," she said.
Pal and her husband Jayanta, who is also an ophthalmologist with an independent practice, have been saving and investing for the better part of their professional lives, but like most doctors, they started working late. “It was a while before we finished our degrees and I started working, and it took even longer for him to set up a successful practice," she said.
While they invested mostly in traditional products like Public Provident Fund (PPF) and fixed deposits, and bought life insurance policies, they also ventured into equity with large-cap mutual funds as they considered them safe investments.
Pal did not link her investments to goals, but pooled them into one large corpus which would serve as funding for long-term goals like her daughter’s education and the couple’s retirement.
By and large, the pandemic has not disrupted Pal’s lifestyle or financial plans, but it has made her more conscious of her spending. The family likes to travel and the curtailment of travel at present has resulted in savings. “We are cutting down on non-essential spends like shopping and going out to eat. By default, some expenses like petrol and car maintenance have also been cut down," she said.
Conserving her corpus and making it last is Pal’s priority now, but she is also acutely aware of the importance of getting her practice up and running again for an alternate source of income.
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