Has the slowdown affected you?

Chitra is a home maker and finds it very difficult to manage the family budget now days and enquired from her husband Anil, who is employed as a Chartered Accountant in a MNC about when will the woes come to an end? Anil explained about the emerging scenario on depreciated rupee, high current account deficit, higher interest on Bank loans, higher consumption expenses and reduced savings. He even warned about either reduced salary or job loss. Both decided to take the help of a professional financial planner.The Financial Planner touched the ten areas which can help them to face the impact of slow down;

 1)    Income: Get your basics right about job and income. In current scenario, you may get a salary cut, downsizing or lower demand for your skills. Find a way to improve your skill sets as per changing industry needs.  Avoid job switch or sabbatical, if it will affect your income stream.

2)    Expenses:  Cut down discretionary expenses like purchasing gadgets, partying out, excessive mall shopping, drinking, smoking etc. Use of credit cards should be minimal.

3)    Contingency fund: Always keep a contingency fund up to 3 months to 6 months expenses. This should include your EMI’s, school fees and household expenses. It should be kept in liquid form either in bank flexi deposits or liquid Mutual Funds.

4)    Insurance: Get insured to avoid future hospital expenses and any unfortunate event that may affect your income generating ability. Ensure to take adequate insurance cover for all major assets like home and home contents. Go for a well defined, reasonably priced, adequate insurance Life, Health, Disability and Fire & Burglary cover for you and your family.

5)    Liquidity Management:   A portion of your investment should be in liquid form. i.e cash in hand, flexi deposits etc. If the all assets are in illiquid form or difficult to liquidate (real estate), you should overview your investment strategies. Ensure that, all your funds are allocated across all the assets classes.

6)    Debt Management - Repay the costly loans/ debts by swapping it with financial assets generating lower interest/return. High EMI and risky jobs are a risky combination. Go for fresh loans if it is for certain essential needs but avoid loans for wants and non essential expenses.

7)    Risk Management: A risk profiling should be done before going for any type of investments. Evaluate the down side hit as you may ill afford it.But  a defined risk can be taken to achieve financial goals. Don’t just blindly follow herd as you may lose very heavily.

8)    Asset Management:  Asset allocation works to create wealth. Your core portfolio is a base for investments. It includes your home, bank deposits, gold, PPF etc.  A wealth portfolio is consists of shares, mutual funds, bonds etc.Always protect your core portfolio and let your wealth portfolio help you to achieve your goals.  Do not indulge in an asset class which is beyond your risk capacity.

9)    Don’t change your goal: You should stick to your goals and its relevant investment vehicle. Instead of goals, you can make change in its priorities as per the market scenario.

10)  Portfolio Rebalancing:  Rebalancing can help your portfolio to get back on track of your goals. Don’t be panic when there is high volatility in market. In fact, when market is low, you can get more units/shares for the same amount.

 

Anil and Chitra got a good number of tips on facing the situation 

Last modified on Tuesday, 10 September 2013 16:10

Prakash Praharaj

Shri Prakash Praharaj has a passion for excellence. He has been awarded two gold medals for securing top positions both in Graduation and Post Graduation in Commerce. He is an MBA with specialization in Finance and marketing. He has been awarded Diploma in Treasury, Investment and Risk Management besides CAIIB from the Indian Institute of Bankers. He is a Certified Financial PlannerCM from the Financial Planning standards Board, India (FPSB), affiliated to FPSB, Denver, USA and Certified Personal Financial Adviser from NISM. He is also a SEBI registered Investment Adviser vide Reg. no. INA 000000045 dated 2nd August 2013.His book "Your Every day guide to Personal Finance and Insurance" has been published by CNBC TV 18 in August 2015.

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