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In The Face of A Growth Slowdown, How to Best Manage Your Money?

By Finserv MARKETS - Dec 30,2019
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When we hear about an economic slowdown, the foremost thing that comes to our mind is the fear of losing our jobs or source of income. Then the second important thing that we worry about is our savings and investments. The most we can do to save our job is to work sincerely. However, when it comes to savings and investments, there are a whole lot of things that we can do to protect them or even profit from them even in the face of a slowdown.

Learning how to manage your finances during an economic slowdown will help you acquire new skills in financial planning, savings and investments. Here are some simple but smart strategies from experts to manage your money during a slowdown.

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Cut down your expenses

The present economic situation has left many in the automobile, manufacturing, FMCG and other sectors jobless. Even if your job or business is safe, a general slowdown can impact every industry if it lasts for an extended period. A slowdown is the right time to cut down expenses that are non-essential in nature and focus more on savings.

For example, if your family dines-out every weekend, think about cutting that down to twice or even just once a month. The below chart shows how you can easily save Rs. 10,000 every month by controlling a few non-essential expenses. Think about investing the money that you have saved on a mutual fund SIP, ULIP or fixed deposit to increase your wealth.

Simple ways to cut down your household expenses

Expense How Savings
 

Eating out

 

Once instead of twice a month

 

Rs. 2,000

 

Food home delivery

 

Twice instead of thrice a month

 

Rs. 1,000

 

Cable subscription

 

Removing channels that you don’t see often

 

Rs. 500

 

Internet plan

 

Using a cheaper plan or controlling usage

 

Rs. 500

 

Gym membership

 

Joining an affordable gym or workout at home

 

Rs. 2000

 

Supermarket

 

Stick to essential items

 

Rs. 2000

 

Car pooling

 

At least 15 days a month

 

Rs. 2000

 

Total monthly savings

 

Rs. 10,000

Don’t cut down your investments

If the markets are not performing well, which is normal in a downturn, don’t pull out or stop your market-linked investments such as SIPs, ULIPs and National Pension Scheme (NPS). Tweaking your fund allocation in mutual funds or ULIPs according to market movements is fine, but don’t stop your SIPs just because the returns are not good at this moment.

In fact, when the equity market is bearish (stock prices are on the decline), investing in SIPs and ULIPs allows you to buy more units of the fund. Then, when the prices bounce back there is a healthy increase in the value of your investments.

Start building an emergency fund

During an economic recession, it’s critical to have an emergency fund to dig in when the going gets tough. Most people neglect this part of money management and only realise when it’s too late. Having an emergency fund is important at all times but it’s even more critical while going through a downturn.

Slow business and job losses are common during a downturn. This emergency fund will help you tide over the tough times and sustain you and your family until you find another job or your business sees a turnaround. You emergency corpus must be able to sustain you for at 6-12 months.

 How to Best Manage Your Money
 How to Best Manage Your Money

Add gold to your portfolio

Irrespective of the economic situation, gold has always been a safe place to invest. In recent times we have seen gold prices rally to new highs as central banks around the world have been accumulating gold to tide over the looming global recession.

Now is the right time for retail investors to invest a portion of their investments in gold. Experts recommend that you can commit 10-15% of your investment portfolio in gold. As storage of physical gold is risky, you can invest in digital gold. You don’t have to worry about storage with digital gold and it’s easy to buy and sell as all transactions can be done online.

Taking care of these few basic points will help you tide over a downturn without a scar. If you have planned well, you don’t have to act with fear. Especially, avoid acting on fear and instincts when it comes to your investments. Economic downturns and booms are a part of life, those who act with wisdom can eat its good fruits.

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