With so much uncertainty around the economy in these tough times, it is likely for people to be confused with things that are happening. In a situation where everyone is fighting tooth and nail, especially in terms of the finances, it is easy to make quick and hasty decisions when it comes to your money. But, this is exactly where you need to put a stop and assess things.
Money related decisions should never be done in a haste and it is also extremely important to ensure that you keep an eye out on the economy and be aware of what is good and bad in these situations.
There are a few mistakes that you are likely going to do and before you do it, make sure to read through this to get a better idea of things.
Sell off all the equities
The first and one of the most common steps that we taken during an economic slow down is sell off our equities and shares. This is a common instinct and not something that you need to be worried about. You are not the only person who has done it. Several of the multi-cap funds have crashed and fallen down in terms of their valuation by 27% but this is not a step that you should take, at least not right now.
Majority of the people want to sell off the equity funds and switch to the bond funds, which is a very common attribute. With the whole country’s economy at a loss, it will take you a lot of time to recover the losses which is one of the reasons why you need to abstain from selling them now.
Seeking loan moratorium
According to the exempts mentioned by RBI, it has given a 3-months loan moratorium to the people who have loans with the banks. While this does serve a purpose in helping those who are in a tight spot financially because of the lack of profits and businesses and salaries, this comes with a cost too.
Experts are suggesting that if you have a loan and you have the capability to pay it off, make sure that you do the same. Don’t opt for the moratorium thinking it will help you.
Be stringent on your daily budget but if you are getting the salary and have a way to pay your loans, make sure that you don’t step down from the same.
Jumping on with the stock buying
With the sudden crash in the stock market, many investors take this as the right time to jump in and buy major stocks and equities. Much like how you should be careful with selling your equities, you need to be careful with their purchase too.
Going overboard with the stock buying will land you in a big problem in case those stocks don’t go back up once the market is back functional. The global economic recovery may take longer than expected. There is no time frame to it, so investing on stocks without any limit can do worse than good.
Withdrawing from the retirement funds
During this time of crisis, the finance minister has allowed people to tap into their retirement funds like PPE and such to liquidate them and get the money to sustain themselves during the hard times.
Withdrawing this money can seem like the next best thing right now but to be honest, this can also impact the compounding rate of interest that you could have gotten otherwise. This is one of the reasons why it is important that you don’t withdraw until your back hits the wall.
Breaking into the savings
In case you don’t have any money left in your bank account, it makes sense for you to break your fixed deposits and such. But, if you are going to withdraw them thinking that the same will end up affecting your rate of interest when the economy reopens, you are mistaken.
Yes, it is likely that the future rate of interest on new plans might be less but the same might not impact the prior savings and deposits. Make sure you consult someone who knows about these and then proceed with your decision.
It is very easy to make hasty decisions during times of a crisis much like what we are experiencing right now. Don’t fall prey to that and ensure that you do take your time out of it and think before taking any form of decision.
