By Dr Finance
Attack the recession monster before it starts gulping down your cash savings, says Dr Finance.
One may curse, whine, pray or plead but there still seems to be no escape from the after effects of the financial downturn.
But before this recession monster starts gulping down our hard-earned savings, let’s attack it using some time-tested strategies and tools.
The following habits combined with your indomitable spirit will ensure that you are left with plenty of cash to meet your needs and more:
1. Take the responsibility
Wake up and smell the coffee! Realise the seriousness of the current global crisis - do not feel ashamed to alter your lifestyle during the current phase - even sportspeople and defence personnel have to alter their strategies during crises.
Make a list of your material desires for the short-term and long-term. Define carefully whether you really need them and classify them in terms of their urgency and importance. In case they’re not urgent – you can easily postpone splashing your cash on stuff that is merely intended to boost your ‘snob value’.
2. Create a back-up plan
The strongest emotion dominating the society during recessions is the fear of the unknown. Conquer your anxiety by being ready with alternative plans (at least three) in case you lose your current source of income. This includes keeping your resumes/ CVs and professional skills updated, networking with your professional peers, keeping a track of the trends in your industry and being aware of the ever-changing government/ bank regulations. You can also explore various ways of supplementing your current income.
Importantly, speak to your family and friends and prepare them for any eventualities; you’ll feel a lot more assured.
3. Stick to a budget
What if you lose your job or your business goes bust? You need to have a cushion of cash to fall back on, isn’t it? Notwithstanding Dubai’s rules regarding how long you can stay in the emirate once you’ve lost your job, you must set aside at least cash equivalent of three to six months of your household’s living expenses (including rent and utilities). Make sure that you stick to a budget after earmarking your emergency fund.
4. Automate your transactions
I wouldn’t advise you to throw away all your credit cards – many give you benefits that will save you money. Instead use them wisely. Unless you are charged for each transaction, pay by debit cards. The last thing you want right now is more liability. So use the credit cards only for convenience and pay off immediately.
Instruct your bank to automatically transfer a specific amount from your salary account to a separate savings account; and leave it alone. Also, pay most of your bills online. This ensures that you are keeping physical cash in hand to minimum levels. At times, it’s not need but your ability to spend that tempts you to make those silly purchases.
Along with the ‘Envelope Budgeting Method’, automated transactions will help save more cash. [ Click here to view the Envelope Budgeting Method slideshow ]
5. Take the cheaper alternatives
Is the price of all the products and services you use really worth it? Be methodical in your purchases - hunt for bargains, recycle and reuse things wherever possible, shop on off-days, buy in bulks, travel by public transport and save on eating and entertainment expenses. Sounds tough?
Well, not really. Over the next few months, Dr Finance will provide you lots of tips on saving more in all these areas.
6. Review your Assets/ Liabilities
You ought to know what your net worth is – the amount by which your assets exceed your liabilities. The current downturn is probably the best time to attack your debts. On the one hand your lifestyle has been dramatically altered and on the other, borrowing has become expensive. So it would be easier for you to pay off your creditors without indulging in any new borrowings. Besides, a review of your assets and liabilities will give you the confidence to face any surprise financial outflows. Also, you’ll know how much you need to invest for your future.
7. Start investing NOW!
Merely higher income and stingy spending will not push up your positive net worth. Recession or no recession, do not delay your focus on investing. Even small amounts go a long way in generating huge amounts over 20-30 years - put away small portions of your money into for e.g. retirement/ pension plans, life insurance plans, medical insurance plans – this may put further curbs on your spending right now but then don’t you want to retire in comfort?
A final note: if I started today’s tips by urging you to wake up and smell the coffee, I also urge you to calm down a bit, keep good health and smell the roses. There are so many things that the recession still can’t deprive us of: our innate talents, our beloved ones, the natural beauty around the city and best of all - our faith.
Remember, it’s your conviction alone that will drive you to stay disciplined and fight hard to save every fils that you earn.
LET ME KNOW : Did you find the Dr Finance Budget Planner useful? How has it helped alter your spending habits? Do write in to share with your fellow readers.
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This article is a gem. The problem is that people refuse to see things the way they are supposed to be. Why should I alter my lifestyle, people say, life is short. It is true that it is short, but that does not mean to live like there is no tomorrow and end up rediculing yourself and borrwoing from people and credit cards when the going gets tough. I know peolple that live lifestyles way beyond their means just to say I have a style. I also know what happenned to them when they lost their jobs. They could not last 1 more month.......
"Instruct your bank to transfer a specific amount from your salary automatically to your savings account." You don't have to instruct them... they automatically do it without your knowledge! COME ON!!!
Mr Pink Floyd before you criticize Dr. Finance you need to think that the article is for everyone, not only smart a.. like you. That means mainly mothers who manage the household finances. My CEO manages a company worth billions of dollars and he can hardly delete an email. Not everybody can do banking online.
#8- If you got cash, hold on to it like dear life
Thank you Dr. Finance for your lessons. I believe point no. 2 was the scariest part... I do not believe that most companies in the U.A.E. have decided on alternative or back-up plans before the recession at all. They thought they will go bigger and bigger neverendlessly. What a pitty...