After the 2008 global financial recession, this is what Martin Khor, the then Director of South Centre, wrote – “ The causes of the global financial crisis are to be found in the financial and economic policies of the developed countries, primarily the United States (US). Developing countries are not responsible for it, but they are now seriously affected”.
An ongoing crisis like the current pandemic is a looming threat to not just a particular nation, but the entire world. People panic with their finances; they don’t know how to use them in a good way.
In India, the start of the pandemic brought with it negative news. The stock market fell by as much as 30%, e-commerce platforms had to shut their operations, corporate layoffs increased, the GDP growth fell to 3.1% during the fourth quarter of fiscal year 2020 and the common public was left to fend for themselves, scared and frightened. (See Economic impact of the COVID-19 pandemic in India)
In scenarios like these, it’s paramount for people to understand how to construct their budget and get through tough times without falling into debt traps.
Understanding A Crisis and Overcoming Financial Stress
Identifying problems: What is the primary problem causing financial challenges? This could be an existing loan with high interest or an exorbitant monthly bill. Identify it first and learn to mitigate the risks. It helps in getting a permanent solution to your troubles and plugging the gaps in your financial situation.
Setting priorities: Panicky behavior is the biggest obstacle during a crisis. Considering setting priorities between your finances; and necessary expenses. Understanding the situation and listing out needs vs wants will help.
Address the problem: Stop delaying making decisions because of panic, fright, or lethargy. Don’t ignore the rat hole in your kitchen. Decide to confront the crisis and start working on it.
Developing a plan and budget: Consider creating a budget. It will help in getting your finances back on track. A detailed, well set out plan always helps in reaping future benefits.
Tracking progress: Don’t just sit back after making a plan. Execute it and track your progress. See if it works, and if not, start working on a different plan. Keep on your toes and keep working your way up.
Learning to adjust budgets in times of crisis
- Cutting down unnecessary expenses: Ask yourself – do you need that Netflix subscription right now? Can you survive without getting yourself some sweet treats? Do you need the latest smartphone in the market?
Economics, as defined by Lionel Robbins, is summarized as ‘making choices in the face of scarcity’. This is what everyone would do well to remember, making the essential, and important choices. Consider your utmost necessities. They could be your usual groceries, paying off basic utility bills like water and electricity, or fuel charges.
- Considering substitution: Consider this – your budget doesn’t allow you to eat out or have some sweet treats. You can’t afford expensive books or going to movies. What do you do then? You substitute them. Create treats at home, read through online open-source libraries, and watch old uploaded movies online. Substitutions might not be exactly what you desire, but it can satisfy your cravings in a cinch!
- Staying on track with debt payments: Remember, the more you delay paying off existing loans, the more you get stuck in the debt trap. Take it slowly but ensure your debts don’t become a raging mountain. It helps to get financial help sooner rather than later because the more you second-guess your financial choices, the less you can put your hard-earned money to good use. It helps your financial stability and you would sooner come out of the crisis.
- Considering assistance from financial organizations: Taking up this step wasn’t the norm in earlier times, but not today. There are many quality instant loan apps all around ready to help you with your cash crunch while offering a simple, easy to use interface right from your smartphone for the whole process. With proper budgeting and expense planning, you wouldn’t consider yourself into falling into any debt traps.
EarlySalary is one of the forerunners hereby being India’s earliest consumer lending platform. They have helped in getting short tenure instant loans to people in the form of salary advances and have now passed a million instant loan disbursals.
Yes, it’s no hidden secret that a crisis can be scary. But at the end of the day, all that matters is how you manage yourself and confront the crisis. Things can become hard, but we could find our way through by using various methods and techniques.
Think smart, work hard, and keep yourself stress-free!
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