Managing money is not so easy in the best times when economies are booming. Moreover, it becomes even more difficult in times of distress.
All major economies in the world are facing recession worries and it is identical for India as well.
In our post 5 things Millennials must do to be recession ready, we explain that when a recession hits, Millennials will be the most affected generation among all.
It seems like our worst nightmare could soon be a reality. And when this reality comes knocking on our doors, there will be no hiding from it.
As per Trading Economics, the unemployment rate in India increased by 0.4% in the month of February 2020.
And this is only the first month of corona shock without any lockdown in India. This increase in unemployment is only going to widen in the coming months as economic activity came to a halt.
So, it is of supreme importance to take control of your finances before they take control of you.
In this post, we will through some light on the following
- Why creating a budget is important
- Covering basics should be the priority
- Money borrowing must be thoughtful
- Why Health Insurance is a must-have
- How Financial Counselling can reveal stress
- Part-Time work can help with necessities
Let’s begin to go through the post.
Create a Personal Budget and Stick to it
Budgeting is not like second nature and is not so easy as it sounds. But you have to start somewhere. And having to live on fewer resources than usual can be a great push start.
You should review your monthly income and expenses. We suggest using a Google Sheet Monthly Budget Template for writing down your budget.
Budgeting helps reveal any Income deficiency and exposes excessive spending. All-in-all, it is a well-documented plan for your finances.
If you do not budget or fail to follow your budget, then you will have to make a bigger dent on your savings. And rebuilding them takes a long time.
So, firstly, make yourself a monthly budget (on a spreadsheet if possible) and then stick to it.
Cover Basics First
To begin with, you must take an honest look at your monthly income and expenses. So, you can cut back on frivolous spending.
Maybe in earlier stages of temporary unemployment, you might not feel the need to reduce spending. But it is crucial.
In case of a sudden job loss, your primary focus should be on meeting your necessities and nothing else.
Necessities generally include rent, utility bill, food, transportation and insurance payments.
Next thing to do is to find out where you can cut your spending
- Trim your bills by buying generic items and let go of the habit of buying only branded goods.
- Try using alternative transportation – your cars can eat-up a significant amount of your monthly income. Not using a car or cutting back to using only 1 car would save you money.
- Reduce or eliminate your phone, cable, internet expenses and other subscriptions. These charges take up a substantial amount.
- No more luxurious things. Completely avoid dining outside, going for entertainment, any memberships and all personal care expenses like premium salons.
You should follow these above-mentioned things even after the lockdown ends until you find your next job.
Borrow money wisely
If you borrow money and take up a fixed monthly EMI while you face a job loss, then sadly you are destined to mess up finances.
You should adhere to these guidelines if you think of borrowing:
- Do not borrow money for anything. Borrowing money for basics can be considered but only as the last option.
- Refrain borrowing from banks, as if you are not able to pay back in time, your credit score will be severely downgraded.
- Do not use your Credit Cards, they carry a very very high rate of interest. Read our post about how Credit Card cash withdrawals are like loans.
- Borrowing from friends and family should be the last resort. Also, be aware that your relationship might get impacted.
Moreover, if you already have any EMIs that you must pay and also have any type of investment. Then sell off that investment to close your loan amount.
Get Health Insurance
Coronavirus is a major health crisis. And it is highly contagious. Getting sick these days is pretty easy.
Many Health Insurance providers in India have agreed to cover COVID related medical expenses.
Getting admitted to a hospital without health insurance can be very expensive. These medical expenses during job loss will drain you and your future-self.
Financial Counselling is useful
If you feel scared and anxious then get Financial Counselling right away.
There are only certain things in your control and taking undue stress about them will not help.
A Financial Counsellor can provide you with insights about how to manage your loans.
One such type of financial counselling trust is DISHA TRUST.
Debt Doctors is a story where a person recently borrowed money more than he can repay and got stuck. He got help from a financial counsellor.
Explore part-time jobs
Finding full-time jobs that complement your career can be difficult. You should not hesitate to look for part-time gigs.
You can consider online jobs like teaching or tutoring online. You should also start applying for temporary roles which involve administrative work.
You can also trade or barter for items or services you need.
Your job loss is temporary. Almost everyone faces a layoff at least once in life. And we know that this can crush your self-esteem. But do not beat yourself because of this.
Never stop having fun. It is important. Make sure that you mix with people and do things which you actually enjoyed but never had the time to do.
Everyone comes out on the other side in better shape. Like you.