During the last week of April 2021, our whole family infected with Covid. It is a horrific time when the whole family infected with Covid. But luckily we all came out from that. During this period, I too learned certain lessons related to Covid and Personal Finance. Hence, thought to share with you all.
My experience of Covid and Personal Finance Lessons
# Cash is KING!!
Yes, we all addicted to online money transfers or UPI-based fund transfers. However, during my hospitalization, I realized the importance of cash. We all three (me, wife, and daughter) went to the hospital in a hurry and admitted with few thousands of cash in my pocket. But later on, I realized that few expenses can’t be payable through UPI or net banking (like paying money to fruit sellers or some small expenses). As we all being patients, we faced a little bit of cash crunch even though money is available in our account. The sad part is that we can’t go out and withdraw the cash nor anyone was allowed to withdraw the cash and give us in the hospital.
My wife and daughter discharged two days earlier than I. When I booked the cab for them, the driver was not ready to accept the money in any online form. Instead, he insisted only in cash mode. For me, no option but I was forced to pay additional money to the staff of the hospital and get the cash from them to pay to the driver.
Hence, these small but during that period most important incidents, made me learn the importance of cash.
Even though we keep a certain amount of cash in our home, but the mistake I have done was that in a hurry, I not took the cash with me while hospitalized.
Moral-Old beliefs of cash still relevance (even though not fully) even though we moved to cashless
# Importance of Emergency Fund
First time, I was in a situation to touch my emergency fund to pay the advance amount during the hospitalization. I felt happy that I no need to worry. I set aside around 2 years of my monthly expenses as an emergency fund. Before Covid, my emergency fund used to be around 6 months of my monthly expenses. However, after last year’s lockdown and Covid, I increased my emergency fund drastically to two years of my monthly expenses.
Getting the bed during this horrific time is the toughest task. Hence, hospitals are in a demanding mode. Because of this many hospitals not accepting the cashless benefits of insurance. Even though it is against the rule, we have no option but to pay the bills and reimburse later from insurance companies.
In such a situation, an emergency fund is handy. Even though I have not utilized my emergency fund, but having an emergency fund during such a crisis will give you great relief.
Moral-Having emergency fund will give you a boost to fight with any uncertainties of your life.
# Park your Emergency Fund WISELY!!
Where you park your emergency fund is also important. Many experts suggest you park in Liquid Funds or other debt funds. But remember in the case of Liquid Funds, few funds offer you instant redemption of up to Rs.50,000 a day. If you need beyond that, then it will take T+1 day. I mean if you request for redemption before the cut-off time, then you will get the money the next day. If unluckily you placed your redemption request on Friday, then you will get money on immediate next working days (maybe on Monday). Hence, even though the name is LIQUID, they are not so liquid to manage your emergencies.
Instead of chasing returns on your emergency fund or thinking too much on taxation, it is wise strategy to follow as below.
- Park around 1-2 months of your monthly expenses in your savings account.
- Park the remaining amount in a Bank FD of your choice of a year.
- While parking emergency fund as FD, make sure to split the each FDs equal to your monthly expenses (like suppose your monthly expenses are Rs.1 lakh, then make sure to split your each FD of Rs.1 lakh value). This will create more liquidity without any premature FD withdrawal penalty.
- Make sure to book FDs using an internet banking facility. So that if you need money in midnight, you can liquidate the FDs instantly.
Moral-Keep your emergency fund SAFELY and where you have highest LIQUIDITY. Neveer listen to the financial industry. They are always ready to SELL something to you. Keep your emergency fund as per your comfort but not as per their comfort.
# I used credit card than emergency fund
Even though I have sufficient emergency funds, I have not utilized them. The reason is, we all three admitted to hospital on 1st of May. My credit card billing date is the 22nd of every month and I have to pay the bill on or before next month’s 10th. So, if I use a credit card to pay the bills in the first week of May 2021, I have enough time to pay the dues on or before the 10th of June 2021.
Hence, instead of utilizing my emergency fund, I have utilized my credit card to pay the bill. Once I was out of the hospital, I immediately submitted the necessary documents to the insurance company. Claims were settled and I have cash now to pay the dues of whatever I have utilized for our hospitalization.
Hence, during the crisis, instead of panic, it is better to use our commonsense and act. I used a credit card not because I don’t have money. But I used it mainly because I will get around 1 month of a window to utilize the money than using my emergency fund. As usual, I will pay all the dues before the due date. Hence, no worries.
Moral-Use commonsense without panic. You always find the ways.
# Cashless benefit of health insurance is not a RIGHT but a FACILITY
Many think that if we have health insurance, then the cashless benefit is our RIGHT. However, because of Covid, many hospitals not accepting cashless benefit options. They are demanding to pay our bills from our own pocket and then approach the insurance company for reimbursement.
You have the options like fight with hospitals, search for a hospital where the cashless benefit is available, or accept the demand of the hospital. In such a horrific situation, where getting a bed is not so easy, I felt paying is a far better option than arguing with them for cashless benefits.
Luckily in my case, my health insurance company settled the claim within few days. Hence, no need to worry. But the learning is that be ready to accept the reality of pay now and receive later than a cashless option.
Moral-Be ready for the BOUNCERS during emergencies.
# 100% Cashless is not possible
No matter how much coverage you have, there are certain expenses that will not be reimbursed by health insurance. Hence, it is always better that you mentally prepare yourself to pay around 25% to 30% of the cost of the hospitalization from your own pocket.
Luckily in my case, I got the reimbursement for almost around more than 90%. Hence, my liability was for just around less than 10%. But you have to be mentally ready to pay the amount which is not reimbursed by health insurance companies.
In such situation, your emergency fund will be handy.
Moral-Never rely 100% on health insurance for hospitalization cost.
# My Corona Kavach Policy turned useless
Considering the way Covid was spreading in Bangalore, I sensed somewhat uncomfortable relying on normal health insurance. Hence, purchased Corona Kavach for our whole family on 21st April for Rs.5 lakh. However, as there is a window of 14 days waiting period and we all three hospitalized within that period, I was unable to use Corona Kavach for my claim.
Instead, I have utilized my family floater health insurance (Super Top Up not came into the picture as the billed amount was less than Rs.5 lakh deductible).
Moral – Sometimes emergency may knock us before we plan for emergency!!
Conclusion- I first time sensed how lucky I am by being in this profession. Because, during this crisis, my doctor clients came for my help and in fact, one of my doctor clients took all the initiative and arranged the bed within few hours for all of us. Even during their busy schedule, they used to reply to me either through Whatsapp messages or calls. Thanks to this wonderful profession and the doctors who guided me and helped.
These are my sharings of Covid and Personal Finance Lessons. If you too have certain experiences, then you are welcome to share your Covid and Personal Finance Lessons here by commenting. It may help many to combat such emergencies of life.
Finally, BE POSITIVE, WE CAN PREPARE BUT CAN’T PREDICT AND BE SAFE WITH YOURSELF AND FAMILY. This too shall pass.