Home / Money / Personal Finance /  Opinion | Covid-19 survival guide for your money and mind

None of us know how to deal with the Chinese virus. We are used to dealing with disastrous events in our lives and in the country. Bomb blasts, a tsunami, torrential rain and flooding, Pakistani terrorists locking down Mumbai as they hole up in South Mumbai killing and destroying, floods, droughts – these have all happened over the past few years in increasing frequency. But these events are localized. They have a devastating impact that is short term and does not affect the rest of the country. A pandemic is not something any of us have dealt with. It is scary because we can’t see the danger. It is like that game where you don’t know under which square the bomb will explode. Did that handshake with the visitor put me at risk? Did the metro ride the other day coincide with the virus case we heard about? Will India move from stage two to stage three putting millions at risk? Oh no, somebody in our locality has been confirmed positive!

Even as we deal with the physical danger of this viral contagion, the other worry is about the world grinding to a halt as localities, offices, businesses, cities and countries shut down. The stock market is showing its panic by the huge daily drops that make the stomach of a hardened investor begin to churn. Long term investing and patience are words that bring cold comfort to somebody who has seen the value of their money drop by 30-40%. The fear is that of the Chinese virus triggering a global depression, not unlike the 1930s depression in the US, causing immense hardship to the people. The fear is of no jobs, of net worth being eroded and a downward spiral that lasts for years.

This is a possible scenario but not a likely one. Economists and experts are of the view that if the social distancing plan is aggressive and succeeds in limiting the contagion, India will see a short, sharp, ugly dip in growth, but the bounce back will be equally sharp. This is not the time to worry about either the fiscal deficit or the GDP numbers, but to ensure that both labour and credit markets don’t freeze. This could mean using the Jan Dhan accounts to pour money directly into the accounts of the daily wagers, for instance. It could also mean that working capital keeps flowing and that loan repayments, tax payments and so on, get some leeway over the current deadlines. The government has the capacity to stop the downward spiral. Understand that a drug will be found to cure the disease, and a vaccine will be developed to inoculate people against it. How we behave in the next two weeks with managing the social distancing will determine whether the hit is short term or prolonged.

How should we go about our lives in this time of great fear and uncertainty? I will suggest five things to do. One, if your income sees a drop (maybe you are a consultant or your job suddenly goes), this is the time to use the emergency fund you had–you should have six months of living costs. You have six months to figure out what to do for money without having to sell your assets in this fire sale that has shaved the value of your long term portfolio. Two, what to do about your SIPs? If, and only if, you have a cash flow problem should you stop your SIPs. If your current expenses are at risk, there is no way you have the capacity to invest for the future. Stop them and other investment plans if you need to. If your income is not at risk and there is no need for the money going into SIPs, do not stop them. These valuations may not be seen again. So grit your teeth at the market red and just continue the SIPs. Three, do not redeem your stocks, bonds or funds at this point. This is the worst time to sell when the value of your portfolio is down so badly. Unless there is a pressing need, do not go into panic and redeem. The world is not going back to caves and wooden wheels, the recovery will happen. Don’t think you will get the bottom of the market – nobody knows where that is. Four, this is a once-in-a-lifetime opportunity to be at home and not be ultra-wired with the world. Use the time to figure out all the things that you said you would do if you had the time. We are saving hours of time on the commute each day, and the pace of work has slowed down for most people – so use this time. Five, forget about trying to save the earth – it will save itself from us – we need to think of ways to save ourselves as a species. The earth will survive. We are the elephant with the ant in its trunk.

Monika Halan is Consulting Editor at Mint and writes on household finance, policy and regulation.

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