Covid-19 hits incomes and leaves high bills behind: Here's how you can cope
The pandemic has created a health and a financial emergency too. With incomes being disrupted and medical bills adding to the long list of expenses, Indians are struggling to keep up. Cash strapped, what should be the next course of action, how can you come out of the crisis. Raj Khosla, MD, MyMoneyMantra.com says that while your medical insurance and emergency fund helps to meet such exigencies, in the absence of or insufficient backup of the two, you should withdraw proportionally from different asset classes.To start with, noting the financial crisis that Indians have been plunged into, the govt made it easier to withdraw for employees to withdraw from their provident fund. In fact, a second withdrawal allowance was allowed recently. But is it a good idea to be tapping into your retirement kitty? Khosla advises against it. He reiterates that even a small withdrawal from your retirement fund can hurt your future goals. "A Rs. 5 lakh partial withdrawal from EPF will actually wane off around Rs. 21 lakhs from your final fund, in case you retire in 20 years & current rate continues. For NPS, the difference will be even higher at Rs. 30-35 lakhs as it is managed by professional fund managers", says Khosla. So always touch your retirement fund as a last resort, i.e. when other options are exhausted.Always explore existing medical insurance policies first for reimbursement of medical expenses. In case of further cash crunch, one should liquidate in this order -1. FDs, Saving A/c2. Debt funds3. Book returns from the share market, and equity funds.4. EPF, PPF and NPS, the last option in the listIf after these assets, or in the absence of these assets, one finds themselves still short of cash, taking a loan is an option. But Khosla warns that loans should be looked at as a bridge credit option to tide over the cash crunch. "As long as you avail of a loan according to your repayment capacity, you can leverage the available credit limit to protect your portfolio and minimize financial stress", stresses Khosla."Furthermore, as COVID situation is still uncertain and the vaccination drive is ongoing, it is recommended to buy health insurance top up or covid specific insurance schemes as affordable protection plans", says Khosla. He adds that one should start rebuilding the emergency fund.