In the days of economic slowdown – How to secure your personal finances

The news of economic gloom and doom is all around us. India’s GDP rate has slowed to 5%, much lower than what was expected. The rupee is not stable against global currencies. Manufacturing industries are severely affected due to stagnant demand. There is wide spread talk of job losses. It’s not just in India, we seem to be in a phase of a global economic meltdown.

Macro-economic trends are affected by national financial policies, global dynamics and even weather patterns. Sometimes these trends are also cyclic in nature. After every bull-run, the financial markets do undergo a correction.

One thing is clear from all these indicators – none of these phenomenon are in the control of the individual investor. But they affect each and every one of us in our financial stability and adversely impact our future financial goals!

Right, so what can you do about securing your financial position irrespective of the macro-economic conditions? There are some simple yet effective steps that can be taken to insulate yourself from the situation around you.

Plan and prioritise your expenses – One of our biggest fears will always be ‘What if I need money for something and I don’t have enough?’ This fear becomes the basis for all our financial planning. Yes, there may be unexpected spends that turn up. And we must keep aside emergency funds for unforeseen expenses. But most expenditure we incur are known and predictable. So it is critical to maintain an expense sheet with periodic expenses and one-time expenses clearly demarcated. With the present day risk of job loss, it is important to build a contingency fund for immediate needs. There is a rule of thumb that says the contingency corpus should be capable of funding at least six months’ regular expenses.

Stay clear of the debt trap – Meeting expenses through debt instruments such as credit cards, personal loans are a very poor way of managing your finances. They are offered at very high rates of interest and the borrower is under great mental pressure to repay the debt. The habit of high interest borrowing is highly prevalent among the younger generation. In the starting years of your career, it is very important to understand the dangers of falling into a debt trap. It can damage your entire financial stability in the future.

Keep a majority of your funds in fixed return instruments – When you put your money into fixed return instruments, there is a predictability on the gains you can expect and at predefined time intervals. Fixed deposits, PPF, government small savings schemes and chit funds are the most popular fixed tenure/fixed return scheme options. It is recommended to keep a majority of one’s savings in these schemes. That way, you are insulated from the market conditions to a large extent.

Do your research before picking volatile market investments – Equity shares trading and mutual funds might offer higher returns than fixed instruments. But this is not true all the time. When the market is on a high, these options might fetch great returns and high dividends. But when the market is weak, like how it has been in the past few weeks, there is a risk of losing a lot of capital. So individual investors must enter into the equity markets only if you are willing to spend time analysing all market conditions. You must pick the best fund houses, safe companies and the right brokerage mode. With high returns, there is always higher risk. Never forget this.

Earning more is important, spending less is equally important – A penny saved is a penny earned. When the going gets tough and businesses are struggling to sustain their profitability, salary hikes will not happen and jobs might also be cut. In such a scenario when income is limited, it is critical to put a cap on your expenditure. Analyse your expense sheet and identify items that can be avoided. Check whether your regular expenses can be minimised by choosing more cost effective alternatives – such as choosing public transport instead of self-driving. Mobile bills, petrol bills, TV subscriptions, eating out, shopping binges are all spend items that must be periodically reviewed and controlled.

One of the ‘fixed tenure’ and ‘fixed returns’ investment option is Chit Funds. When you choose a chit fund, you are investing money every month for a fixed tenure (say 2 years). During the tenure of investment, you can use the chit fund amount accumulated for meeting expenses that you had planned in advance. Chit funds normally offer better rates of return than fixed deposits. Choose government approved chit fund schemes and your money is also secure.

Shanthala Chits is a Government approved chit fund company with a 23 year successful track record and thousands of satisfied customers. Shanthala Chits is registered under the Chit Fund Act of 1982, Government of Karnataka. We are one of the most popular chit fund houses based out of Bengaluru, known for our prompt customer support and secure investments.

Get in touch with us and start with an investment scheme. We will be glad to help you out with the right scheme that matches your needs.

Make the right investment choices and protect yourself from the instability of external market conditions. The power of choice is in your hands.

Anuradha C

Anuradha is a freelance writer cum corporate trainer in the IT/telecom domain with over 18 years experience. She served in senior technical and management positions in Huawei and TCS for 10+ years. Then gave up the traditional corporate ladder to go solo - in order to escape horrendous city traffic and to be at her own boss!
Anuradha C

Leave a Reply

Your email address will not be published. Required fields are marked *