Key tips for managing money during the recession

By Anshul IST (Released)

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Are you worried about how a potential recession could affect your finances? Assuming you have some time to prepare, here are some key tips that might help you manage your money

A recession affects business sales and stalls or prevents economic growth.

There can be widespread unemployment as organizations lay off large numbers of their staff due to rising costs. Additionally, retirement accounts and other savings accounts can suffer if investments like stocks and real estate lose money.

Growing financial uncertainty may also cause lenders to increase their loan requirements, making it harder for people to get new credit.

Although economic recession is inevitable, it is possible to weather the storm if you anticipate challenges early and prepare for them.

Here are the key steps that will help you prepare for uncertain times:

Analyze your financial priorities

In a recession, it is difficult to predict what will happen next and when things will improve. Therefore, it is essential that you are clear about your financial situation, said Abhinav Angirish, founder of Investonline.in during a conversation with CNBC-TV18.com.

Establish a budget and track expenses

According to Archit Gupta, Founder and CEO of Clear, individuals should start preparing a budget and listing expenses.

“Determine how much you can save based on monthly expenses and income. Review your budget and set financial goals,” he advised.

Increase your savings

Start spending wisely during a recession. Try to cut back on non-essential expenses, such as restaurants, entertainment, and clothing.

When you make conscious spending choices, you can increase your savings.

Make sure you have an emergency fund

You should keep a reserve of cash for unexpected expenses, such as car repairs or medical issues, as these costs continue to rise. Build your cash reserves by directly depositing 10% of every paycheck into high-yielding liquid funds, Angirish said CNBC-TV18.com.

According to financial advisors, you should have an emergency fund that covers three to six months of living expenses.

A recession, however, will force you to have more cash on hand – finding a new job could take up to a year if you lose your current job.

Be patient with your investments and think long term

It’s essential to remember that investing is a long game, where you benefit the most from holding your own over the bumps. Market moves can be exciting, but they can also be destabilizing.

“A market downturn can be a good opportunity to buy stocks at a bargain price. Use SIP to take advantage of the average cost in rupees. This involves investing small amounts regularly rather than investing a lump sum at a time. Investing in this way reduces the volatility that affects an investment.” Angirish said.

Diversify your investments

Diversifying your investment portfolio mitigates risk and combats market volatility. Invest in multiple asset classes such as bonds, stocks, gold, real estate, etc., Gupta said.

Bonds have often been a good source of income, while equity mutual funds can increase your portfolio growth. You can also reduce your vulnerability to economic downturns by diversifying into international funds.

Note to readers

The opinions and investment advice expressed by the investment experts on CNBCTV18.com are their own and not those of the website or its management. CNBCTV18.com advises users to check with certified experts before making any investment decisions.

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