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A silver lining to the downturn of 2008-09; 4 money management lessons from the recession which made us poorer, but definitely wiser!
By Poornima Kavlekar
2009 was a year that many would like to forget. After an ecstatic 2004-07, the unprecedented downturn of 2008 altered investment paths severely. You can consider yourself lucky if you escaped this meltdown, what with the massive drop in value of investments in stocks, mutual funds and unit linked insurance plans.
What is even more agonizing is that for most people, it came without notice and impacted jobs, investments and long-term goals. Some of us are still in the process of damage control. But the fact is that this meltdown has lessons for us on how to manage one’s money without compromising too much on returns and long-term goals.
To achieve this, one must start with the right approach to investment planning. With the economy promising to alter its downturn course, now may be a good time to take a re-look at how things need to be done this time around.
Risk is an integral part of any investment. And macroeconomic risk is something beyond your control. To counter such risks, diversify your investments to various asset classes – equity, debt, metals and real estate – and decide how much risk you are willing to take. For instance, if you are a 30-year old whose main aim is to create wealth, you may be more inclined to taking risks as compared to a 45-year old. You could look at holding a majority of your investments, say around 70 per cent, in the form of equity and equity-related instruments, while the remaining portion can be distributed in debt instruments.
Be prudent before you buy a fund or a stock. (Read our Beginners Guide to the stock market to understand how.) If you are buying mutual funds, stick to funds that have a long- term track record. Select the fund based on the track record of the fund manager. Invest through the systematic investment plan (SIP) route as it will give you the cost averaging benefit. Buying stocks at the right price based on your risk profile and time horizon is good investment acumen, something that was thrown to the winds during the last boom period.
Set aside a certain portion of your money regularly for liquidity and emergency needs. L.Ravindran, Managing Director, Wealthmax Enterprises Management, a wealth management company suggests, “As a thumb rule, setting aside 25-30 per cent of monthly disposable income after meeting rental needs could be a good option.” Ensure that 6 to 12 months’ expenses are available as a nest egg to meet emergency expenses.
Set aside a certain portion of your money regularly for liquidity and emergency needs.
Add to your portfolio, assets that are not volatile/ linked to market movement and can be liquidated easily. “One good way of doing it would be to add silver, platinum and gold to your portfolio,” feels Ravindran. Indian investors can now buy gold in the form of exchange traded funds (ETFs) which is based on physical gold but the investor just holds it in a demat form.
Get rid of high cost loans such as credit card debt, car and personal loans as soon as you can. Reduce borrowing with age. Ravindran suggests, “While borrowings can be 4 to 6 times (of your earnings) when one is 30- years- old, every ten years the borrowings will have to drop by 50 per cent to breathe easily at the age of 45 to 50.” A thumb rule for prudent borrowing would be to ensure that your EMIs are not more than 40 to 45 per cent of your inflows if you have a home loan and not more than 20- 25 per cent if there is no home loan in the picture.
The side effects of an economic downturn are the fear of job loss or in a less severe form, of pay cuts or no pay hikes. While things may not get out of hand if your spouse’s job is secure, re-skilling yourself or taking up part-time assignments will be an advantage. In case you have to tighten the belt, cut the discretionary expenses first. If you use credit cards, stay within credit limits and pay before the due date. Or opt for a debit card. Still can’t cope? Prune the mandatory expenses.
You really needn’t tighten your belt very much if you follow a disciplined approach towards money management. Of course, the magnitude of it will depend on the situation you are in. But if there’s one thing this recession has taught us, it is that it always pays to be prepared.
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People say that women are the greatest enemies of women. I vehemently disagree. It is the patriarchal mindset that makes women believe in the wrong ideology.
The entire world celebrates International Women’s Day on March 8, 2024. It should be a joyful day, but unfortunately, not all women are entitled to this privilege, as violence against women is at its peak. The experience of oppression pushes many women to choose freedom. As far as patriotism is concerned, feminism is not a cup of tea in this society.
What happens when a woman decides to stand up for herself? Does this world easily accept the decisions of women in this society? What inspires them to be free of the clutches of the oppression that women have faced for ages? Most of the time, women do not get the chance to decide for themselves. Their lives are always at the mercy of someone, which can be their parents, siblings, husband, or children.
In some cases, women do not feel the need to make any decisions. They are taught to obey the patriarchal system, which makes them believe that they are right. In my family, I was never taught to make decisions on my own. It was always my parents who bought dresses and all that I needed.
14 years after her last feature film Dhobi Ghat, storyteller extraordinaire comes up with her new film, Laapataa Ladies, a must watch.
*Some spoilers alert*
Every religion around the world dictates terms to women. The onus is always on women to be ‘modest’ and cover their faces and bodies so men can’t be “tempted”, rather than on men to keep their eyes where they belong and behave like civilized beings. So much so that even rape has been excused on the grounds of women eating chowmein or ‘men will be men’. I think the best Hindi movie retort to this unwanted advice on ‘akeli ladki khuli tijori ki tarah hoti hai’ (an alone woman is like an open jewellery box) came from Geet in Jab We Met – Kya aap gyan dene ke paise lete hain kyonki chillar nahin hain mere paas.
The premise of Laapataa Ladies is beautifully simple – two brides clad in the ghunghat that covers their identity get mixed up on a train. Within this Russian Doll, you get a comedy of errors, a story of getting lost, a commentary on patriarchy’s attitude towards women, a mystery, and a tale of finding oneself, all in one. Done with a mostly light touch that has you laughing and nodding along.
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