Dialog between a Financial Advisor and his client who is likely to be handed a salary cut because of Covid-19.
The client is 43 years of age and just about 4 years ago he started investing in a Retirement Plan and has accumulated Rs. 5L in that. Now with the Covid-19 virus striking his job as a Restaurant Manager in a 4 star hotel seems to be in threat. His boss has already sounded him about a pay cut. He is not sure about when the hotel will be opened.

Welcome, welcome to the world of uncertainty. In this scenario how will he contribute Rs. 7000 to your retirement fund?

Financial Adviser: The cruel answer is you cannot. You just do not have the cash power to pay Term insurance, medical insurance, school fees, EMI – and pay for home expenses on a salary of Rs. 40,000 per month. On Rs. 80,000 you were finding it difficult, so on 40K it will be impossible.

Client: So what to do now?

Adviser: Well, for starters lets do the following –
Dramatically cut down on costs to start. This means you sell off the car that you do not need. There is no point in keeping a car to be used for 25 km every weekend. Makes no sense to keep things which are expensive to maintain – the car is the first thing to go. I would have suggested selling one of the airconditioners – but hey window ac does not have a resale value anyway!
Client: Should I take the moratorium on the housing loan and the car loan?

Adviser: I just said NO when your cousin asked, but I would ask you to take the moratorium. This is because I know that your insurance premium and school fees committments are coming up in the month of MAY. So, I do not want you to pay the EMI. Till your job starts I want you to take all the credit that you can get.

Client: What else can I do?

Adviser: Luckily for you, You are the only son of your parents – so do the unthinkable – move back into their flat in Central Mumbai. Once you move in, get into the process of selling off your flat. No, not that it is going to be easy, but it is better than trying to pay society charges, EMI, etc. you will not be able to meet the cash flow requirements.

Client: you are suggesting dramatic changes in my life.

Adviser: be thankful that you have the options. Most others will not know what to do with such a drastic fall in their cash inflow. Even your choice depends on whether you want to go back to your parent’s house after a gap of 9 years.

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