As we have always seen, planning for the unknown future is highly imperative. There are a lot of uncertainties in the economic scenario of a country due to various reasons. This necessitates keeping a plan ready for emergencies. The following are some tips that can help you in the event of financial stress. You could also visit the money control website for more insights on this topic.
Emergency fund:
It is always advisable to save some money in the form of an emergency fund. When an economic recession starts to set in, there is a possibility of job losses. With so many commitments at hand, it can make your life turn turtle before you could think of it. An emergency fund is money that is saved to help you through in times of financial difficulties. This fund is your safety net where you can fall back in times of crisis. A minimum of 6 month’s wages should be set aside for this purpose. It is easier to resort to debts but it is not a safe practice. With the income also reduced, there is no way you can pay the debt any sooner. So practice the wiser method of saving for the future so that you can always be confident of tiding through tough times. It is better if you foresee this and start saving much earlier.
Diversify your income and investments:
Diversifying the sources of your income is one of the desirable ways that can help you overcome a financial crisis. This is because when that single source is affected, like a job cut, your income gets blocked and all your monthly payments will get disturbed. Here, multiple sources of income help you handle the situation well. You could take up another part-time job in a different industry, or identify your skills where you can earn better.
Also, all your investments should not be stacked up in a single source. Diversification of investments is very much essential to take the best of all. For example, if your investments are only in stocks and the event of a financial crunch, the stock prices may tumble leading to a disaster. Gold funds can be another good source of investment. It has high liquidity and so can be easily converted to cash when a crisis strikes. It is also less volatile than other sources. Investments in other countries can also be a cushion to help you in times of crisis since the crisis in your country will not have much impact there.
Mindful spending:
There is always a cry about differentiating between needs and wants. What you need is definitely a must for your living but it is not the same with your ‘wants’. It is not possible to establish a clear line of difference between the two as this is subjective. Always your budget should first focus on your needs only. When this is met and you still have enough money apart from your savings, you could go for what you want. This way you will be able to save wisely for those testing times.
