Handling Recession

Economic recession is some time is an emotion and pessimistic feeling spread very fast and in fact
create a recession.
AS the feeling gets stronger individual cut down expenses by way of avoiding loans and discretionary
spending. As it grows in number the slow down hits the company and the cut in production and
inventories and leads to reduce in working hours and gradually leads to cut in man power.
How serious in the recession and how long it stays in an economy? Several times it has been seen
that it last for a year or two. So typically, what an individual has to do shield himself from it and also
the business person needs to do are explained below.

Ten points to beat the recession.

Emergency fund: Often across life cycle it is advised that you need to have fund to meet eventuality
either 3,6 12 months expenses as back up to tide the situation. If you are employed in high risk job
that are going to get hit in recessionary period more than any other sector you need to have higher
corpus.it should be predominantly in financial assets either deposits, liquid mutual fund or high
interest giving savings account .this will shield you to greater extend from the impact of recession.

Track down your monthly expenses: It is always good to have a tap on the expenses and more in a
recessionary period. By doing so you can eliminate unnecessary expenses. For example, if you are
frequent movie goer or going to hotel cut down the no of visits this will help you to save money to
tide over the difficult times. If you are one among the frequent week end traveller make it to at least
monthly once till you feel comfort of the economic situation.

Pay down debt: In a tough economic situation, in India earning high returns are not possible, so it is
advisable to reduce interest outgo provided if your repayment interest is higher than the possibility
of earning.

Tracking your debt: If you have good credit score and good repayment track record better to find
avenue to reduce your borrowing cost. With limited off take for loan from borrowers the bank may
offer special incentive for new borrowers. If your existing loan is at higher interest and if you can get
the new loan at least one per cent lower than the existing interest rate change the lender. However,
keep in mind of the processing charge and pre closure before shifting the loan.

Buy what is must avoid temptation: Since job situation may undergo challenging period in
recessionary trend avoid unnecessary debt trap. In this situation better keep adequate reserves this

will give peace of mind to family and as well as better balance in the work place. So, in a cool
working environment good performance will help you to save your position in the organisation.

Go through your portfolio: Revisit your portfolio if you have bought junk stocks at higher price and if
the recovery is remote sell it.In the event of deposits with some NBFC and still they have not faced
any issue still if you are conservative investors better go for early redemption and move to company
or bank even if the earning is a per cent lower. Once things are normalized then the interest rate
might again jump with NBFC so you can move the deposits back to high yield deposits. If you are
holding the gold and keep looking for stagnation and sell if at higher prices.

We have seen after one -two years rally gold under performance for few years. Take money out at
peak and redeploy at equity mutual fund.

For self- employed /business People

Evaluate and eliminate debt: During the peak of the business cycle you could have taken loans at
higher interest to meet the demand. Now, earnings itself a challenge better close the loan or look for
better interest rate. However, continue to have the working capital limit this will be useful in the
event of the recovery in the economy. This will help you to have early mover advantage and to
acquire new clients don’t get tempted to trade in equity or commodity to compensate the loss of
business income.

Downsize head count: If you have less work at least try and reduce the working days and give
weekly two day off. At least this will reduce your monthly over head cost such as power and
miscellaneous expenses. This is the time to identify the under performer and eliminate them.

Reduce the inventories: High inventories will eat away the profits and also leads to high interest
cost. So, produce based on the demand if you have higher inventories due to previous business cycle
give on credit to worthy clients and this will alteast fix you sale.

Concentrate on sales cut down discount: Business people look to give higher discount to clear
inventories but keep in mind the cost of manufacturing or trading cost. If your cost of inventories
built on your own internal cost and not going to impact your finance be careful while giving the
discount.