Covid-19 pandemic highlights the importance of financial consolidation

As the year 2020 draws to an end, it's time to take a look at a not-so-publicised study. The findings of this study are crucial to our everyday living and it throws up more questions than answers. If the study done by a leading portfolio management group, focused on NRIs and HNIs, is anything to go by, as high as 80 per cent of spouses are not aware of the detailed assets and liabilities of their partner. That's not all. An even higher number (89 per cent) had never done a consolidation of their finances, while 73 per cent of the respondents had not done a detailed income expense evaluation ever.

In a normal situation, one would have possibly ignored what the study has revealed. In fact, that's what we have been doing for years. But lockdown and the associated uncertainties during Covid-19 left people greatly concerned and on the other hand, made them relook into their financial portfolios, something they had never cared for. The whole idea behind this consolidation activity is to make them aware of the criticality of doing a self-analysis of their finances, the importance of financial consolidation and the need of getting one's family involved in financial matters.

It's high time, individuals find answers to some unanswered questions like 'are my savings enough', 'do I have a contingency plan!' or 'are my expenses overboard' or even, 'where my current investments are and what do I do with them!' so on and so forth.

Interestingly, again going by the same study, 65 per cent of the respondents were saving less than 20 per cent of their salary and out of these, 80 per cent of them had their miscellaneous expenses as much as 15 per cent to 20 per cent of their salary, which could have been curbed and saved. This trend was higher in people earning less than 50 lakhs p.a. The monthly Investment to Savings ratio in the earning group of 30 lakhs and below was found out to be 0.65 which for the earning group of 30 lakhs and above stood at only 0.38 as they prefer to keep more money in the accounts. This shows that the higher income groups usually do not optimally invest on a regular basis in comparison to lower income groups. It is extremely critical to self-analyse one's financial standing, especially for those whose jobs keep them too occupied and spouses must have a productive communication with their partners towards sharing the financial responsibilities and maintaining healthy finances of their household.

Consolidation exercise, though time consuming at first, becomes a ready reckoner of the areas we need to work upon to be financially sound. And mind you that knowing the problem is half as good as solving it.