Anuja Kalsi, 41, runs a home-based bakery business and Sandeep Kalsi, 46, financial service professional
Anuja Kalsi, 41, runs a home-based bakery business and Sandeep Kalsi, 46, financial service professional

How to shield yourself from slowdown: Never lose sight of long-term goals, cut your discretionary expenses

  • Individuals in the middle-aged group should look at increasing their current income through various channels
  • Kalsi is unsure about the kind of salary increment he will get this year and has postponed upgrading his car and has cancelled a foreign trip with his family

In response to the current slowdown, Sandeep Kalsi, 46, a senior professional in the financial services industry who has a 15-year-old daughter, has chosen to cut down his consumption. “I’ve postponed upgrading my car. The rate cuts haven’t reduced vehicle EMIs to an affordable level. I also eat out less and have postponed foreign travel," said Mumbai-based Kalsi, who is unsure of the kind of salary increment he will get this year.

Like Kalsi, middle-aged householders with children, are a group that have high income but also heavy responsibilities. This makes them highly vulnerable to economic shocks, which is why they need to tread carefully.

Cutting expenses is the most obvious way to go, but individuals in this group should also look at increasing their current income through freelancing or renting out assets, among other things. “In times of economic slowdown, individuals should curtail social expenses. However, they can also try income-raising solutions. For instance, if they are living in their own property, they can rent it out and move to one with a lower rent than what they are getting," said Rishabh Desai, a Mumbai-based independent financial adviser.

In all this, it is important not to lose sight of your goals. “I have kept my SIPs unchanged," said Kalsi, who has opted to cut down his credit card bill drastically from 80,000-90,000 to 9,000-10,000. He has chosen to prioritize savings towards his daughter’s higher education over consumption heads such as buying a car and taking a foreign trip.

Having an emergency corpus can see you through tough times. SK, who did not want to reveal his full name, lost his job this year due to adverse government orders on mining companies. The 55-year-old has three daughters, one of whom is working. SK had previously approached a financial adviser who had ensured that he prepaid his loans and converted his traditional LIC policies to “paid-up" status, which allows policies to accumulate surrender values and does not need you to pay further premiums. You get the value of the policy on maturity. However, your life cover also gets reduced in proportion to the number of instalments paid. He also surrendered his Ulips and realized their accumulated value to build a healthy emergency corpus. “I live off my savings and the rent from some properties I have," said SK. “I am also looking for another job. However in the meantime, I’m not pressed for money due to my investments," he added.

Experts have also warned about high exposure to risky assets in uncertain times. “In times of economic crisis, individuals who have high equity exposure (more than 50%) should change this allocation to a mix of high-quality debt funds and dynamic or hybrid funds for regular flow of income," said Desai. SK, who had previously purchased some properties saw them lose value as the slowdown hit the real estate market and is having trouble selling them.

Investors should move towards low-risk, fixed-income options in troubled times, without compromising on long-term goals.

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