India found itself among recession-affected countries when its first quarter’s (April-June) GDP growth rate fell by 23.9% – the worst contraction in Indian history. Unemployment rates are historically high, and the economy is in bad shape due to the worldwide pandemic. This is similar to the global recession from the 2008 financial crisis. Over 43 million people in the United States had filed for unemployment benefits, an unprecedented rise since the great depression.
Unfortunately, a recession like this is entirely out of control for the everyday folks. But what can be controlled are the response measures taken to face the recession. This might not be the last recessionary period, hence, we should take some proper precautionary measures to recession-proof the finances to be future-ready. While we’d shared a list of financial tips for 2020 earlier, the post-COVID era calls for a relook at how to manage our finances.
1. Emergency Funds
The idea of safety or an emergency fund is to keep ourselves above the water. A dip in the economy might mean increased unemployment and decreased incomes. An emergency fund can act as a safety net in case of a fall so that you can always rise.
Cutting down on unnecessary expenses when times are good might mean extra savings, which could be added to your emergency fund. After all, saving during a recession is quite difficult in contrast to saving when times are good.
Making a budget for ensuring that the remaining funds don’t run out. A list of necessary resources should be given a higher portion of the budget against discretionary spending. A separate budget set aside might prove to help in case of times of economic downfall.
3. Clearing Debts
As soon as the economy starts to fall, creditors would rush to get their debts paid. But such a period might overstress for an individual living hand-to-mouth. The best way is to pay up debts as early as possible. Give creditors priority, which ensures that they don’t run behind you for their money.
4. Downsizing Lifestyle
A subscription to OTT platforms might not be essential in these times over essentials. A sugar rush could be contained but not the expenses related to education. This behavior could be inculcated even amidst better times, which should help increase savings – and help contribute to emergency funds. A frugal lifestyle doesn’t explicitly mean living hand-to-mouth but instead making conscious and wise spending choices. Sustenance is what we’re looking at. Check out the EarlySalary blog for more financial insights and tips.
5. Diversification Sources of Income
As the sources increase, so does the income. Some extra work might make one feel burdened, but it brings with it extra money, which will always help your livelihood. Further, as the recession strikes, there is still a possibility of losing the job. Multiple jobs or any other sources ensure that the income cycle keeps going even when one of the sources has stopped.
It shouldn’t be necessarily being employed by someone; one could be employed by himself/herself. Renting out assets like a garage, a car, or an empty flat might give monetary benefits. One could use their talents to generate income, like teaching skills or performing somewhere.
6. Investment Diversification
The adage of ‘don’t put all your eggs in the basket’ aligns well here. An economic fall might mean losing more of your funds if it has been tied in the same investment. Increase and diversify your portfolio in different assets and sectors. Other than just keeping your investments in the stock market or mutual funds, look around and find other assets. Invest in commodities, debt instruments, and more.
7. Seek Guidance from Financial Institutions
India’s Largest Instant Personal Loan & Salary Advance Platform – EarlySalary helps customers get short-term and low-cost instant loans for their needs. Whether it’s rental payments, utility payments, or even a medical emergency and education fees; Early Salary has its borrowers covered. It’s one of the few institutions that’s entirely digitized, enabling rapid access to loans within a few minutes, at highly competitive rates.
The critical secret behind recession-proofing your finances in learning and knowing. Keeping oneself aware of all significant developments in the economy might help one make informed decisions. Further, as the saying goes, ‘prevention is better than cure,’ making preparations in advance should lessen the economic downturn’s effects on your finances
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