After the 21 days sudden lockdown many people might have this question in mind, Whether I can manage financially for these 21 days and any further lock down , few might also be wondering whether others can manage. Well for those who always planned their Finances this was never the question as the had Emergency Funds parked for such situations which comes all of a sudden.
So do you wish to be a part of that some people ? If yes keep reading ahead.
1) What is the first step to start financial planning? If you are planning a journey, the first step is to know ‘from where are you starting your journey’. Similarly to start financial planning the first step is to understand where you are financially. Then you can plan your journey from there to reach the financial destination you want.
i. Fair Valuation of your available Assets and liabilities :-
What are all the assets you own? List down with their approximate market value. Include fixed assets; financial asset. Check your bank statement, investment statements to get the complete list of assets you own.
What are all the liabilities you have? List down all your loans and borrowings. Credit card outstanding, personal loan, car loan, home loan etc.
ii. Record your Incomes Sources :-
There are two types of Income.
Active Income – The income which you get from your main business or job activity. For Example – sale of Goods , services , professional charges etc.
In your active income stream you might be getting some regular income from few clients who give income on monthly basis and Irregular income from few others who give money in unorganized manner.
Make a list of all your clients and see whether you will be able to get regular income post lock down. Also try to communicate with irregular Debtors and try to streamline them.
You can divide the payment cycle into 40 % now -60 % in next 1 month so there is no burden on the Debtor also and there is free flow of cash in the market.
Passive Income – Those income sources which are independent of your business or job,
This stream of Income flows from the asset you have generated for example – rent , dividend from investment. For rent income you need to contact the tenant and see whether his job or business is going on in lockdown or is on hold in order to give him some extra time to make payment. Also make a note about this to record your Financial inflows.
iii. Record your Expenses :-
This is very crucial part. You have to bifurcate your expenses into Fixed expenses which are incurred without any Income generation for example: Rent expenses, Staff salary etc.
The second type of expenses is depending on your income generation.For example ; material cost , traveling cost , job worker employed for specific task etc.
Make a list of creditors who give you a credit period for payment of the material.. Contact them and make some negotiations and try to pay them in similar 40-60 % ratio in order to realize cash to them too.
iv. Emergency Funds:
Make a habit to keep aside a specific Percentage of your Gross Sales or Gross Income of every month as a Emergency fund to get through such rough days in life.
Remember the percentage needs to be defined and the amount should be parked in some liquid assets every month.
” Financial Planning helps you sail through financial crises. “
The article is authors personal opinion and should not be considered as anything else.
For any further assistance the author can be reached at :-Email : [email protected]