By : Veejay Bhatia, Accounts, Finance & Administration Manager, French Firm dealing in Oil & Gas, Dubai UAE
Source : http://www.moneycontrol.com
Activity: 3 comments 530 views last activity : 07 06 2010 20:18:04 +0000
10 Tips to best Recession
A new R-word started making rounds in the financial markets all over the world in early 2008-09. The big R for RECESSION was responsible for crippling economies, huge companies shutting shop and limiting job opportunities resulting in massive lay-offs all around the world.
Below are 10 tips from Financial experts Kartik Jhaveri and PV Subramanyam to stay afloat at a time of financial crisis.
According to PV Subramanyam, most people who got into major trouble during the recession have done so because of the following:
1. Living far beyond their means
2. Assuming the bonus every year will keep increasing
3. Buying a house far greater than their needs
4. Working in the financial services industry like mutual funds, life insurance, etc. where a huge downsizing is still to come.
5. Paying too much for a poor quality MBA
If you belong to any of the above categories, is there any way to fix the problem? Yes, there is.
1. Make cuts / adjustments to lifestyle / protect cash flow / don't splurge
Remember when you were younger; your parents gave you a certain amount of money as allowance for the month. Why should that change, even while you make your own money?
So where it is for business or personal, designate a fixed amount of money every month for specific "allowances". For example, for personal expenses, you can give yourself a grocery allowance, an entertainment allowance etc. Stick to this amount, don't overspend. In fact, this is a time of crisis; watch one less movie!
2. Credit cards: To have or not to have?
Have a bouquet of credit cards adorning your wallet? Well, this is not the time to show off. If your credit card bills are going over the roof, it's time to re-evaluate your life. How?
PV Subramanyam suggests, throw away all your credit cards if you cannot control using them.
If you have debts:
- Spend your Diwali /yearly bonus wisely. Cut our all your debts; especially credit card debts.
- If you have more than one credit card, discontinue using them.
Kartik Jhaveri, however, suggests the contrary. According to him, "plastic money is so much easier to use, if you can pay off all the bills on time."
- Don't use cash at all. Swipe your credit card for all payments and purchases.
- Just make sure you have enough to pay for it at the end of the month. Making payments on time is critical.
- Don't just end there. Make sure the bank has received your payment.
3. Start saving / investing and creating an emergency fund for the rainy day
No matter how much you earn, you should have a thumb rule of keeping 10% as savings, and another 5% "for a rainy day".
Essentially, at any given point of time, you should have between 2-6 months salary worth amount in your bank account. Who knows what kind of emergency might just strike?
According to Kartik Jhaveri, "In emergency situations like a lay-off, you need at least 6-12 months of expenses. Make sure you stock up your bank savings account."
4. Downsize the house / move back with parents / stay with friends
Are you single and living in a three bedroom apartment by yourself? Why not make use of the space? Get yourself some roommates. Or you can earn a good amount by moving back with your parents and giving your apartment on rent.
5. Be realistic in your pay expectations
After all those lay-offs earlier this year, many companies are looking to hire. And it is always good to have expectations regarding remuneration. However, make sure you have realistic expectations. Be ready to negotiate pay packet while in an interview. A decent 30% hike is a good enough raise. Expecting a 75-100% hike is unrealistic at this stage.
6. Don't be in a hurry to make prepayments
You may have a good sum on money in hand and might want to use it to prepay your home loan as soon as possible. However, Kartik Jhaveri suggests otherwise. He says, "If you have the money, clear off other expensive debts, credit card payments and personal loans."
You might also want to check with your financial advisor as to whether this is a good idea in case of your loan.
7. Clear off your expensive loans
Do have you an expensive loan you are paying off? This is the time to clear it off. Especially personal loans! Use all the extra money you get to get these loans out of the way.
8. Don't rush into making a conservative investment portfolio.
During this uncertain time, you might want to keep your money as safe as possible. But don't block your money by putting it in traditional and conservative investments like FDs. Look at point 9.
9. Build portfolios
According to Kartik Jhaveri, "Recession is a great time to build your financial portfolio. Whatever you save, make sure you invest. During this time, you get cheapest price and cheapest rates, as well as the best deals."
Make good investments, so that when the market starts to look up, you get good profits.
10. Don't FREAK out!
Remember, a Recession is not something that can be controlled. However, this time, the worst is over and done with.
Take heart! Indian companies are hiring, and the economy is looking up. Make the most of it.
Thanks for the Health Tips, Suresh... It always comes at a right time from you ! Just curious to ask "Why left Ear" for answering the phone?
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