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Recession or not, here's what you should always do

While, you and I will not be able to predict a recession, here are some things that you can focus on in case you find yourself staring at such a situation.

Recently it was announced that India’s GDP growth has slowed down to 5%, which, even the RBI Governor admitted came as a surprise. 

An economic slowdown if it continues for six months or more and starts to impact job growth, consumption and manufacturing among other things, then it could well turn into a recession. If that happens, you have to dig into your reserves and find a way to get through a bad patch with minimal financial discomfort. 

While, you and I will not be able to predict a recession, here are some things that you can focus on in case you find yourself staring at such a situation.  

1. Entrench your skills at work 

Make yourself indispensable at work in times of slowdown. Job cuts are not unheard of during slow growth and any reemployment can come with a pay cut. You have to work towards trying to avoid a situation that puts you out of a job. 

2. Take stock of your portfolio

Dig in and find those forgotten investments. There is always a fund, bond, excess gold assets or a forgotten deposit. Do a financial clean up and bring out old and forgotten investments. If they are worth keeping, then leave it as is. Else redeem and reinvest to suit your future financial goals. An economic slowdown is accompanied by falling asset prices and no better time than now to re-engineer your portfolio.

Ideally you should have an emergency fund for difficult times. You may not lose your job, or even go through a pay cut, but there is a very real possibility that you will have to bear zero annual pay increment and lower bonuses. 

3. Save, save, save

Ideally you should have an emergency fund for difficult times. You may not lose your job, or even go through a pay cut, but there is a very real possibility that you will have to bear zero annual pay increment and lower bonuses. 

At the same time, your expenses are unlikely to reduce; you will have to continue paying school fees, salaries to your house help, petrol bills, medical bills and so on. Bonuses are a big help in fulfilling a lot of excess expenditure too. In periods of slowdown, without a bonus to fall back on and with no emergency fund, saving more is your answer. Cut back on the frills. 

Managing money is not just about knowing where to invest and how long to remain invested. It is also about ensuring that in the bad times, you have a monetary cushion to fall back on. This cushion needs to be made from before and you need to keep maintaining it so that it is strong enough to take the weight when factors like a slow economy start to eat into your income and investment gains. 

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