Nidhi was quite beside herself. She had been watching the grim news about the outbreak of COVID-19, that was enveloping the world in its deathly embrace. Staying at home, Nidhi, her husband, Vinay, and their five-year-old daughter, Natasha, were safe from the virus that was spreading like wildfire. However, there seemed to be a larger and scarier problem that loomed at the household – financial crisis.
Nidhi’s office had just announced that owing to restricted productivity and loss of business, the employees would only be given their basic pay, which meant the loss of almost half of her income. Her husband ran a small café, which had been doing well until recently but had to be shut down in observance of the national lock-down. He had no other means of income. To add to their financial woes, the couple had been paying substantial amounts each month as their home loan and car loan EMIs.
“A friend of mine working in the government has hinted that the lock-down may get stretched for the next couple of months,” Vinay sadly announced.
Nidhi feared this to happen. With a significant loss in their income, the couple would have to borrow from their piddly savings to pay the bills. And then, horrible thoughts swarmed her mind, ‘What if the situation worsens? What if her young company shuts down? What happens when their meagre savings run dry?’
Panic-stricken, Nidhi called her best friend, colleague, and advisor, Sylvia.
“Did you hear that the government may plan to continue the lock-down for another few months?” Nidhi blurted out in haste, “What will happen if we have to continue with half the pay, or worse, no pay at all?”
“First, take a few deep breaths, Nidhi. Relax! It is a global crisis, and we all have to go through it. Don’t panic. It’s no good,” Sylvia consoled her friend in a calm, soothing voice.
Nidhi explained her financial situation to Sylvia and voiced her fears about the possibility of going broke in a couple of months if the situation didn’t improve.
Sylvia turned over the problem in her head, and after a while, asked Nidhi, “Don’t you or Vinay have any passive income?”
“Passive income, what’s that? You and I are on the same pay scale, and that’s all the income I have. Vinay had invested all his previous savings from his job at the cruise line into the café. Now that it is shut; there is no money coming in from there.”
Sylvia explained to her that a passive income is one for which one doesn’t have to work.
“Do you have some investments that pay you regular returns?” asked Sylvia.
“We do have some shares, but now they are worth much less as compared to the price we bought them,” replied Nidhi.
Sylvia explained to her that having a small fixed deposit or a few shares doesn’t constitute investments.
“I had been building an investment corpus since I was 18 years old. I primarily invested in mutual funds through SIPs, which means investing a small amount each month. I never stopped investing, and once I achieved my investment goals, I started to get a fixed monthly income from my portfolio,” shared Sylvia.
Nidhi needed some more explaining from Sylvia to understand the concept of Systematic Withdrawal Plans or SWPs. Since Sylvia dedicatedly invested for over 15 years, she had accumulated substantial funds in her investment portfolio. A year ago, she opted for SWP from her portfolio, which gave her a fixed monthly income, irrespective of the market condition. Also, her portfolio was still managed professionally and would reap the benefits of market volatility, growing substantially with each passing year.
Nidhi was at a loss for words. She had expected Sylvia to be in the same rocking boat. However, Sylvia was far more financially secure. Now she remembered how Sylvia had motivated her time and again to start investing, but she never paid any heed to it. The truth was that Nidhi never thought that she would ever face any financial struggle. Her husband’s café was growing in popularity, especially among foreigners who thronged the place and gave good business. She had recently been promoted at her workplace and had received a fat bonus during Christmas time. To her, she was in a comfortable financial situation. However, now, speaking to Sylvia, she remembered how Vinay and her lavishly splurged most of what they earned.
Sylvia grew concerned about her friend as she quietly waited for her to speak.
“I am doomed, Sylvia. I should have listened to you and started investing,” Nidhi managed to say between sobs.
“Come on, dear! How can you be doomed when your saviour is here,” Sylvia chuckled, trying to lighten the moment, “If I can’t be of any help to my friend in need, then all that I have created is worthless.”
Nidhi relaxed a bit after hearing that her friend will help her whenever needed. She also promised Sylvia to start investing as soon as the crisis gets over.
“You are an angel, Sylvia. You have taken a huge burden off my chest,” Nidhi said gratefully.
“Well, I am!” Sylvia giggled, “And you are one, too. So, stop moping and focus on our war against Coronavirus. Stay home, stay safe!”
Dr. Celso Fernandes – author, motivation speaker and financial expert – is on a mission to spread the awareness about financial independence among the people of Goa, especially the youth. Along with his team at Nave Marg Financial Consultants, Dr. Celso work tirelessly towards helping people advance on their journey to wealth creation. His message of creating a corpus and generating passive income is pertinent in present times when a majority of households stare at financial crisis in the wake of COVID-19.
Nave Marg 