How to manage your money smartly so that you are ready for a recession

Our financial health plays a significant role in determining our mental and familial stability. An unstable financial situation can not only take a difficult turn, but it can also cause a dent in your happy world. Due to the recent COVID 19 outbreak, many industrial firms and giant companies have faced major economic instability and shutdown. While business organizations continue to tackle this situation and look for solutions, they have simultaneously offered voluntary retirement plans to their employees, even when the government has instructed otherwise. Therefore, in these times of financial unpredictability and insecurity, it is extremely paramount that we not only protect ourselves from this dangerous virus, but also safeguard ourselves from a monetary mess in the future. In order to help you maintain a financially secure future in times of an economic slowdown, we bring to you some smart ways to manage your money.

The Coronavirus pandemic has drastically affected the entire economic system, which can have long-term repercussions on the global economy. In these times of crisis, it is crucial that you manage your funds intelligently. Ideally your emergency fund should cover at least 6 months of your expenses, however, now you must increase it further to avoid any setback in your financial condition. Even if you lose your income due to the current situation, you can utilise these funds to support your family.

While you remain in self-isolation, it is the perfect time to contemplate on your current expenses and understand the difference between what we need and what we want. On usual days, we have the luxury to ignore our budget plans and sometimes even exceed it because we know we have the resources to cover it later. However, that is not the case now. It is crucial that we review our budget and daily expenses every day and prioritize our needs over our wants.

As discussed, one must learn to differentiate between ‘need’ and ‘want’. During an economic crisis, we cannot be careless and indulge in irrational spending on non-essential items. Only when you cut down on your unnecessary expenditure, you can enhance your saving abilities, which will come to your rescue in times of need.

It is always wise to convert your payment modes from offline to online, when you are under a lockdown. The coronavirus has affected people worldwide and therefore everyone is required to stay home and practice self-isolation. Similarly, banks and other financial institutions have also been shut down to avoid contact between people. In that case, If you’re servicing a loan like a home loan, personal loan or car loan and need to pay your EMI’s, you may want to switch to digital payments. While you might not have access to the banks, your EMI payments can get delayed which can result in late fees or loan default.

The COVID 19 outbreak has impacted everyone and everything in the world. However, health remains a big issue in these times. It is crucial that you check up on and review your health insurance from time to time. Check with your insurer to find out whether you can or must buy more insurances. Also The IRDAI, according to media reports, has urged health insurance companies to extend coverage to Covid 19 hospitalization cases in their policies. Therefore, ensure that you go through your health insurance policy documents and get a complete clarity on its list of coverage and exclusions.