In these pandemic times it’s imperative to talk about its long term impact on family finances. Here’s a practical step-by-step approach.
Step 1: Prepare for the meeting
Ensure you have most of the financial data in black and white. If you don’t already have a structured budget and expense sheet in place, make an estimate of your monthly expenses vis-a-vis your income and savings / investments.
Step 2: The approach
It is crucial to have regular and transparent discussions about money with your spouse because it impacts making decisions about budgeting, saving, investing, cutting the right corners especially in times like these.
If you have young children or teens, it is a great way to initiate a healthy outlook towards finance, understand its value, and how to prioritise spending and budgeting.
Step 3: Assess
a) Budget & Expenses
c) How am I doing
A: Assess your budget and expenses: How much are you saving? As a thumb rule, it is recommended to have at least 30 percent of your income put aside for savings and investments. If you are not, the lockdown and the resulting restriction on leisure expenses have presented an opportune moment to relook at expenses and what can be trimmed. Discussing this with your spouse and family and doing this exercise as a household is key. It will help you make a practical list as well as postpone all non-essential expenditure until your savings goals are met.
B) Assess impact on goals: The economic slowdown has a massive impact on employment and salary cuts. This will impact your ability to save and thus, goals such as your child’s education, retirement will take a hit. Which are the other near term and longer-term goals that would be most impacted? How bad is the hit and what can be done to fill the gaps? Discuss these and work towards coming up with solutions together.
C) Finally – how are we really doing? Is there an emergency fund in place that can cover at least 6 months of expenses in case there is no income? How much of your income goes towards servicing debt and EMIs? Ask family members to pitch in and take responsibility, share ideas to cut costs and expenses they can let go.