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Strategies to Deal With the Current Covid-19 Induced Cash Crunch - ABSLMF Blog

How you can deal with COVID-induced cash flow crunch?

Sep 10, 2020
3 mins | Views 10938

The last couple of months have been strenuous for everyone due to the ongoing pandemic. What started as a health crisis has now turned into a financial crisis as many have either lost their jobs or have seen a reduction in their income. Businesses, too, have suffered from zero income from operations during the lockdown and even now as the demand continues to be sluggish, chances of making huge gains anytime soon can be grim.

While we are far from going back to our pre-COVID life, managing our money judiciously is the need of the hour to deal with the financial hardships in these challenging times as even though your income has reduced, you still have to pay your monthly EMIs, school fees, and other fixed expenses.

Here are few strategies that can help you to deal with the current Covid-19 induced cash crunch-

  1. Tap into your emergency funds

    Having three to six months of living expenses for emergencies in liquid assets is a sound financial practice. Your emergency funds are meant to keep you afloat in case of emergencies. The current crisis is an emergency and if you are finding it difficult to pay your fixed monthly expenses, it is alright to withdraw money from your emergency fund to meet your expenses.

    Pro-tip: You can use your emergency funds to pay off EMIs instead of taking a loan moratorium or increasing the tenure of your loan at this juncture.

  2. Create an emergency budget

    Just like an emergency fund is important to help you navigate through unforeseen financial circumstances, an emergency budget is another important aspect to help you in times of financial hardships. An emergency budget is much-restricted budget from your regular budget. Create an emergency budget to cover your absolute essentials and fixed costs and cuts back all unnecessary expenses, big and small.

    Pro-tip: Review your monthly budget with a microscopic lens and you will be surprised as to the additional cash you can generate each month by slightly trimming your budget.

  3. Look for a second source of income

    If you have lost your job or currently on leave without pay, exploring part-time options to generate some income until you find a suitable full-time job can ease out some of the financial burdens. A small income can help divert major financial problems in the future.

    Pro-tip: You can look for a side hustle, like freelancing, etc. to substantiate the temporary reduction in cash flow, till the same is resumed in full swing again!

  4. Assess your current financial goals

    In financially trying times, the only financial goal that you have is to be able to pay your fixed monthly without creating additional debt. So, if your existing income has diminished, re-assess your existing ongoing investments and goals. There could be few goals like vacation which may not be priority now hence money saved for such goals could be utilised for other high priority goals.

    Pro-tip: A Reducing some fringe expenses temporarily might help improve the current financial condition to stabilise the overall plan and fit the investments and mandatory expenses in the reduced cash flow! Alternately look for discounts or offers.

  5. Use your mutual fund investments as collateral

    If you have exhausted your emergency fund and other options, then evaluate your borrowing options as a last resort. You can always use your investments in shares, mutual funds, and other assets, as collateral rather than liquidating these investments.

    Pro-tip: A Not only it can provide you liquidity but also aims that your long-term financial plans are not altered because of the temporary cash crunch.


Looking at the bigger financial picture and having a pragmatic approach to the current cash crunch situation is important to navigate in these tough times. Before you jump in to join the loan bandwagon, it is advisable you analyse your financial situation and be cautious of your spending.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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