Ramalingam K, Certified Financial Planner and Investment AdvisorDirector, Holistic Investment PlannersChennai
With the recent announcement by the venerable Reserve Bank of India that our nation’s GDP has plummeted from a whopping 8.9% to 4.4% for 14 consecutive quarters, it’s time to start thinking about how we could get ahead of this financially Can protect the economic situation from a hard winter? Most Indians have never had a harsh winter in their entire life as very few parts of this country actually have a harsh winter.
Step 1: protect your job
The fact is that the Indian economy has fallen into recession, which has resulted in fewer job opportunities and downsizing. One of India Today’s latest stories is about a horror picture about the job market. If you have a self-inflicted opinion about your job market potential, it is time to do a reality check.
The chances of a better job change are quickly disappearing. There may be situations where you are faced with downsizing without switching opportunities to suitable jobs. So what should you do? Stick to your job even if that means getting a lower salary.
Step 2: Review the Spending on Your Credit Card
Today, most young Indians who have a decent job have gotten into the habit of having multiple credit cards. she
Keep juggling paying credit card bills with purchases made. Once you’ve gotten into the habit of buying by credit card, it’s difficult to break away from it. Buying (usually impulsively) is very addicting. Strong adverse situations require strong measures. Keep a credit card and hand in the rest !!
Step 3: Reduce debt and avoid leverage if possible
Young Indians today have an abundance of debt, home loans, outstanding credit card bills, auto loans, personal loans, and even education loans. Many are double income families, so one and a half income goes towards paying off debts. It’s like there’s no tomorrow. Buying today and paying later is a trap. Borrowing uses tomorrow’s income today.
When tomorrow’s income has become uncertain, it is time to reduce debt by postponing asset purchases and looking for ways to repay debt using available savings.
Step 4: rethink your insurance coverage
Paying for car repairs, medical bills, and unexpected thefts in a falling income scenario becomes painful. Having insurance coverage for this is like taking the proverbial nine stitches on time. Of course, you could have the nightmarish experience of losing money on ULIPs, but that was an investment and insurance product that you fell for, get sick or have an accident, these are situations no one expects but happens. Insurance is most useful in such situations without affecting your savings.
Step 5: Take a calculated and affordable risk
Taking risks is natural for young people compared to older people. Taking risks is also part of an active life. However, it is important to know your own risk tolerance and risk-bearing capacity. In a growing economy, it is easier to take risks as increasing income is certain. Not so in a downturn where revenues are likely to decline in the near future. Hence, the tendency to take inappropriately blind risks must be curbed.
Step 6: your wealth should meet your needs
The accumulation of wealth must be linked to real needs and not to the satisfaction of imaginative dreams. If an Alto meets your need, limousine purchases can always be postponed. If a 1 ton air conditioner is cooling enough, avoid two tons. If a 2 bedroom apartment is sufficient for your needs, buying a 3 or 4 bedroom apartment can be avoided.
Step 7: Asset allocation is the key to investment success
There are risky investments and risk-free investments. You have to choose a combination of both. Based on the required return and risk appetite, you need to create an asset allocation.
Asset allocation brings discipline to your portfolio. It prevents you from timing the market. By regularly rebalancing and maintaining the asset allocation, you reduce the overall risk.
Asset allocation helps you book profits when the markets rise and lets you invest when the markets fall. This eliminates greed and fear and brings emotional balance into portfolio management.
Economic cycles are part of life. It is a saying in Indian tradition that ?? sukh ?? is always from ?? dukh ?? followed, so be prepared for both the good and the bad.