How to survive the slowdown

It is common to hear phrases like, You Only Live Once (YOLO), live in the moment, kal ho na ho, jindagi na milegi dobara and, retail therapy these days. And, most of these phrases are used not to denote any philosophical mindset or some meditative wisdom, they simply refer to overspending, blowing up money for the feel-good, buying up unneeded things, using tomorrow's cash flows to fund today's spend. In addition, the overall advertising sloganeering seems to provide a perfect framework to go down this slippery slope of consumerism, some samples are- 'buy one get one free', 'shop during so and so period and enjoy a 50% discount', 'shop more and save more'. The catalyst of easy lending adds to this fire of instant gratification, there are hoardings around us claiming, 'jhatphat loans', 'easy processing', 'time for the wait is over', 'this festive season surprise your family'. While on the surface all these offers and lure seem heavenly, they only highlight one side of the story, which is – you can acquire your dream product/service earlier that you can afford it, but the fact that these cheap loans will need to be repaid is implied or hidden.

Millennials, at least most of them around us have built their lifestyles around peripheral expenses. Peripheral expenses pertain to the ones which are avoidable or can be easily postponed to a later date and core expenses are those which are critical, which are needed right now. All these peripheral expenses get tough to manage when incomes shrink, increments are low, incentives are skipped or when jobs are lost. In short, all these lifestyle expenses form a habit and are tough to reverse, especially when recession looks to be around the corner. While the government machinery is working towards injecting the economy with boosters (like the corporate tax cut, repo rate cut, startups to be exempt from angel tax, etc) to combat slowdowns, it's best that we investors safeguard our own interests and prepare ourselves for a tougher tomorrow.

We can start by reminding ourselves of the serenity quote, it goes, "God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference." We need to budget our monthly expenses by postponing purchases of 'un required things' reducing the 'eating-out' trends, avoiding quick replacement of FMCG (fast moving consumer goods) and investing all this extra money for tomorrow, for our short, medium and long-term goals. Habeeb Akande has said it so pithily, "Invest in future because that is where you are going to spend the rest of your life."

The second step is to avoid borrowing at all costs, until and unless its an emergency or it's for a home purchase. Regarding house purchase too, stay away from expensive and outlandish projects. When tempted to take a loan (easily available) read out these profound quotes to yourself, one is by Nathan W Morris, it says, "Every time you borrow money, you're robbing your future self". Another one is a popular Swedish proverb, it goes as, "He who buys what he does not need, steals from himself." If even after imbibing them you feel a need to take a loan, well then, go ahead.

Another critical point to consider is to have an emergency fund (equivalent to six-eight months of expenses), adequate life and medical cover for your dependents (both junior and senior). For life insurance, a term plan works best.

Also, review your current investments by checking on the existing asset allocation and the performance (both returns delivered and the risk exposed to) of the investment products.

Money is easy to spend and tough and slow to earn (read accumulate/save/nurture). What you may take months or even years to accumulate could evaporate in the purchase of an expensive smartphone or a smart fridge. There is a difference between the mind-set of the rich people and the middle class. It's this attitude which makes them what they are. Robert Kiyosaki says, "Rich people buy luxuries last, while the poor and middle class tend to buy luxuries first."

It's best that we prepare ourselves for the tough times ahead while there's still time.

The writer is a certified financial planner, founder partner of Srujan Financial Advisers LLP and author of 'Why Greed is