Everyone needs to save for the unexpected. And by smartly managing finances, we can all easily withstand our short-term financial disparaties.
In light of the business uncertainty we face in the coming weeks, we all need to make some sound financial diescisions to secure our wellbeing.
In this section, we share a few tips on managing your finances during this season:
1. Use Your Savings Wisely
It’s time to make smart decisions with your savings. Figure out how much you need. Construct a detailed list of your rents, utility bills, insurance, salaries, property maintenance, etc. Track your spending and income to get an accurate picture of your financial situation.
2. Continue Investing Small Amounts in Recurring Deposits
Take out a small amount from your salary and invest it in a recurring deposit every month. Smart and safe, RD is an ideal saving option if you do not want to take any risks with your investments. Recurring deposit
accounts also offer the facility of withdrawal of the account anytime. While the bank might charge a small fee for pre-withdrawal, it is still a good option to have, in case you need urgent funds.
3. Contribute Gradually into Fixed Deposits
A fixed deposit
is yet another safe investment option. Unlike other investment options, FDs are not market-driven. You get an assured sum of money at the end of the maturity period. Moreover, FDs are liquid. You can withdraw your FD as and when needed. This feature, assures you, that you always have a certain sum of money to bank on.
4. Invest in Mutual Funds - It's safe!
A Mutual fund
is a simple, tax-efficient tool to invest. It enables investors to pool their money together into one professionally managed investment. Systematic Investment Plans (SIPs) are mutual funds that not only allow you to invest in smaller amounts, but also help you maintain a disciplined approach to savings and investment. Moreover, since Mutual Funds in India are regulated by the Securities and Exchange Board of India (SEBI), your investment is safe.
5. Invest in Gold
At a time of financial uncertainty, high inflation, depreciating exchange rates and economic recession, gold is also a better investment than the stock market. During a recession, stocks may fall as companies make less profit. Your gold will still remain a financial asset for you during bad times. The reason is that gold has an intrinsic value. Studies show that gold prices have positive price elasticity, meaning the value increases as the demand increases in the future.
6. Use Compound Interest as Your Emergency Funds
Each time your bank pays interest (be it daily, monthly or annually), you earn a certain extra amount along with your original deposit amount. Set this extra amount aside to cover unexpected expenses, such as unforeseen medical expenses, home-appliance repair or replacement, major car fixes, etc. This practice can keep you afloat in a time of need without having to rely on credit cards or other important savings.
During a crisis, it’s important to draw a line between emergencies and everything else. Do take the necessary steps now to increase your financial security in the coming weeks.