The economy is amidst a slowdown. Stock markets are volatile. Oil prices just spiked again. Demand is muted. The government is taking several measures to stimulate the economy. But we’re some way from full recovery. Financially speaking, this may not be a great time for most Indians. But one must remain calm and optimistic. This doesn’t mean you bury your head in the sand and wait for the volatility to pass. It’s advisable take steps to fortify one’s finances to guard against unforeseen situations such as a loss of job. This will help you come out on the other side of the slowdown unscathed.
Here are some tips worth heeding to help you sail through.
Reconsider Your Budget
While budgeting can be boring and difficult to stick to, it is the basis of personal finance. If you have any plans that could burn a hole in your wallets, such as foreign trips or home improvement plans, forego them for the time. The key is to prioritize your expenses smartly and cut corners where you can.
Pump Up Your Cash Reserve
Having an emergency fund in a sluggish economy can assist you when your personal finance graph dips. It’s usually a reserve of six months’ or more worth of living expenses and covers your unavoidable expenses such as EMIs, rent, insurance payment, children’s fees, groceries, etc. It will help you absorb the stress of retrenchment. You could use a recurring deposit or a fixed deposit or park your money in liquid funds to build this corpus.
Expand Your Skillset
Evaluate your skills and identify which can translate into job opportunities, or — at the very least — bullets on your resume. You could do some side jobs such as home tuition, photography, freelance, etc. Any extra income could contribute to your cash reserve.
Don’t Miss Out An Insurance
Remember that insurance is critical to your finances, so don’t cancel lose your coverage thinking it to be a dispensable item. One hospitalisation could drain all your savings in days. Hence, insure yourself and other family members who will lose their coverage with your loss of employment. Do keep in mind that a term plan can support your family’s finances even if you were to meet an untimely end.
Don’t Let Fear Drive Your Investment Portfolio
Having several investments and deposits gives you a cover, but don’t pull your money out in a moment of panic, as fear should not drive your decisions. Even if active investing takes a break during your retrenchment, avoid the urge to liquidate everything. In a worst case scenario, if you have to dip into your investments, exit your investments in an orderly fashion. Go for the most dispensable investments first – such as those instruments with the least potential for growth and returns. These could be bad investments you were looking for an opportunity to exit. Next, look to liquidate your short-term holdings such as FDs first. Only after you have exhausted these and your need for funds still continues, dip into your long-term investments. But remember to replenish those once your career is back on track.
Collect Your Dues
Ensure you collect all your dues, reimbursements, bonuses and any other pay-out you are eligible for. Every rupee matters.
Needless to say, you need to be frugal at this point. Although there is no point in becoming a miserable scrooge just yet, it is best to be prepared.
The writer is CEO, BankBazaar.com