From April to June 2020, India’s GDP declined by a substantial 24.4 %. According to provisional estimates of the Annual National Income for 2020-21, as well as the quarterly GDP projections for the fourth quarter of 2020-21, India’s economy contracted by 7.4%.
The third and fourth quarters experienced only a sluggish rebound, with GDP rising by 0.5% and 1.6%, respectively. As a result of these data, it is clear that the Indian economy has entered a period of contraction. Higher unemployment, a general financial crisis, and decreased earnings came from the economic slump. To overcome this circumstance and avoid a similar catastrophe in the future, it is advisable to make prudent financial preparations.
This highlights the importance of being prepared to face any financial crisis or crunch that may arise. This article has been written to provide you with 8 easy ways that you can adopt to keep yourself prepared for a personal financial crisis that might arise.
The following are the said ways:
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Maximising your Liquidity
An investment strategy is based on a person’s objectives, primarily the financial objectives. When investing for retirement, a longer lock-in time is recommended for individuals. However, in the case of investments meant to address financial crises, they should be more easily liquid. As a result, one should invest in assets that are less risky in the event that they decide to withdraw the money early due to any unforeseen event or requirement. A fixed deposit is an example of such an instrument.
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Cutting Down the Expenses
To create an emergency and easily accessible budget, one must first minimise the monthly expenses incurred. And for this, eliminating superfluous spending is one major way.
Individuals can cut costs in a variety of ways, and this would include:
- By keeping track of your usage, you can save money on your power and water bills.
- Closing accounts that are no longer in use but for which maintenance charges must be paid on a periodical basis. If you aren’t using such accounts or the subscriptions, then we can cancel them.
- Several OTT platforms might help you save money on cable expenditures.
- Lastly, purchase genuine and high-quality items that you need so that they will last longer than cheaper alternatives.
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Avail Car Insurance
Obtaining insurance coverage is another effective way to safeguard your assets. A four-wheeler, like any other asset held by you, is subject to numerous risks. In the unfortunate event of an accident, one will be forced to pay high charges to restore the damage to their vehicle, which would drain all the savings made or even more.
A car insurance coverage, on the other hand, efficiently covers such repair costs and reduces financial liability. Obtaining at least a third-party car insurance plan is required by the Motor Vehicles Act. Only third-party obligations are covered with this plan.
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Prepare your Emergency Budget
It is crucial to track one’s income and expenses, as this helps prepare an emergency fund that can be accessed in case of an unexpected need. When planning an emergency fund budget, consider both your financial commitments and your risk tolerance. An individual without dependents, for example, will require a smaller emergency fund budget than someone responsible for a family, including siblings.
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Availing Health Insurance
One of the direct causes of an individual’s growing financial obligation is rising medical bills, as well as other bills that are becoming increasingly costly on a day-to-day basis. Furthermore, unexpected hospitalisation as a result of accidents or diseases results in significant costs that interrupt one’s financial planning and stability.
Several insurance firms offer health insurance that covers treatment costs and other hospital fees, owing to medical inflation. Policyholders who purchase a health insurance policy can choose between reimbursement and a cashless facility for the treatment of illnesses or accidents. During medical emergencies, an individual may be required to pay for expensive treatment out of pocket, which can increase financial risk and ultimately lead to a crisis.
As a result, purchasing health insurance to cover these costs can help a person save for the future. Furthermore, by comparing several plans online, one can select an insurance plan with cheap prices.
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Paying of Debts on an Immediate Basis
Defaulting on bill payments and other debts can increase a person’s financial obligations, as penalties may be severe or the expenses owed may rise. Similarly, failing to make credit card payments can increase the amount of interest charged on the account’s balance, which is a mandatory one.
As a result, before establishing an emergency fund to protect personal resources in times of distress, individuals may wish to consider paying off debts on time, thereby keeping these additional costs at bay. To avoid defaults, one might set standing instructions on their accounts for prompt payment of utility bills and regularly examine their debt accounts, fostering financial discipline.
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Increasing Sources of Income
Individuals who want to secure their personal finances might consider working part-time to supplement their income and earn some extra cash. Even if the supplemental income is less than the primary source of income, the money can accumulate to create a secure and sufficient emergency fund.
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Try Improving and Keeping Your Credit Score High
In the event of a personal financial emergency, an individual may need to borrow money from a financial institution. Lenders review a borrower’s payment history when approving a loan amount based on the application submitted. As a result, people with solid credit scores and a good payment history have a better chance of getting large loan amounts or even any loan amount. Because personal financial disasters are virtually always unforeseeable, one should consider preparing for them ahead of time. As a result, its influence will be lessened, and uncertainty and tension will be reduced. Individuals can use the aforementioned guidelines to better plan in this regard.
Thus, we can now conclude that preparing yourself for a financial crunch or crisis is not a difficult task and can be accomplished easily with good planning. This list is not exhaustive, and you can always consult experts with good financial knowledge for planning your finances.
Our team here at Kanakkupillai will always be there to assist you with any financial needs.
