The world economy already feared a recession as we were leaving 2019. The United States and China had their horns locked in a trade war. Rising tariffs were forcing companies to either shift base or charge higher in the goods and services market. All over the globe, trade was down, and signs of a slowdown were evident. Then to inflict more human and economic damage, came the COVID-19 global pandemic. With factories shut and supply chain disrupted, the world now stares at a massive recession.

In a recent report in March 2020, the United Nations’ trade and development wing UNCTAD predicted that the global economy would lose close to US$ 1 trillion in 2020 due to the pandemic. If not contained soon, a “doomsday scenario” will hit the globe, and the economy will lose over US$ 2 trillion. This came on the back of the World Bank’s warning, which earlier stated that the COVID-19 pandemic could throw an additional 11 million people into poverty in the East-Asian region and the most vulnerable are workers of the tourism and manufacturing sector. It also slashed the region’s growth rate to 2.1% in 2020, down from 5.9%, and said that the recession is likely to continue for years to come.

As history has shown us, all economic entities face turmoil periods during a recession. While firms cut jobs and salaries to minimize expenditure, households struggle to make ends meet. A financial crisis following the COVID-19 is inevitable. Thus, managing your personal finances is about to get a lot tougher than it has been in the recent past. Here is how you can get started:

  1. Control your spending habits

If you are not feeling financially secure during this ongoing crisis, it is time you pay a closer look at your expenses. Cut down wherever possible and buy only the bare minimum. For the time being, look for ways to buy the maximum products at a minimum price. You may also consider purchasing in bulk to save on the overall amount.

Remember, no amount is too small to save in a time of crisis; so, relook your entire monthly budget and single out the expenses that can be deferred for a few months. 

  1. Take advantage of the RBI moratorium offered only if necessary 

The Reserve Bank of India has allowed all Indian banks to offer a moratorium period of 3 months on all EMI payments. If required, request your bank to halt your deductions for now and start paying again when things improve.

However, do keep in mind that the moratorium only offers immediate relaxation but extends your credit span. You will have to pay interest for the added time at the same rate as you do now. So, if you can, continue paying your EMIs to avoid a high overall payment. But do take the offer’s help if the situation is indeed dire for you.

  1. Prioritise your monthly bills

Were you saving for a foreign vacation? Or, was there a fund to pay for the down payment of your new home? Unfortunately, these will have to take a backseat for now as essentials like electricity, gas, and insurance will take priority. You might also have to negotiate with your private lender, if any, to hold off debt payments for the time being.

Often, some landlords are willing to take a delayed rent if the financial crisis has hit you hard or educational institutions may agree to accept fees in installment if you can agree on common terms. Negotiate with all agencies that you pay monthly bills and delay or reduce wherever possible.

  1. Cancel non-essential subscriptions

Home quarantine or country-wide lockdowns may make Netflix, and Amazon Prime subscriptions seem like a necessity. You may also want to order books in bulk or get an online library subscription. But at the end of the day, these are just luxuries of good times. Even unlimited internet packages are extra expenses that you can avoid.

Stick to the free media on OTT platforms and your DTH subscription for entertainment. Unsubscribe the expensive channel, read the books you already have, and rely on YouTube for free videos. Such small steps to trim off non-essential subscriptions can help you to save during these difficult times.

  1. Take a loan to avoid immediate difficulties

Businesses are all but shut. But the owners still have to pay their bills. And if your firm or job is even remotely connected to the airlines or tourism sector or even manufacturing, you cannot expect a drastic revival any time soon.

Although the government might announce a relief package for SMEs, you can consider taking a short-term loan to pay your necessary bills. The RBI has cut the repo rate to allow more liquidity, and the banks are sure to give out loans at lower interest rates.

Still, just because it is easy to take a loan, do not depend on it anyways. Consider it as a resort of last level, and be prepared to pay a higher interest if you take an instant personal loan

  1. Hold on to your current job

If you still have a job amidst this ongoing COVID-19 crisis, protect it with all your might. Harvard Business School has predicted that the current pandemic might not lead to wide scale layoffs, but companies could throttle hiring to check their operating cost.

As the crisis deepens, experienced candidates may still have a market, but new entrants will find it difficult to switch or even find another job. Hence, despite your current professional position, avoid resigning from your company. Hold on to it till the next few months and then consider switching. A steady paycheque now is a distant dream for many. If you have it, guard it.

  1. Save in secure short-term plans

It goes without saying that all your surplus income should go into savings. But you should also look to make the most of whatever you can put in. For starters, banks provide short-term fixed deposit options that have a return rate higher than your savings account. There are also secure government bonds that allow short-term investments.

And then there is the stock market that is currently spooked by the impending recession, and blue-chip shares are selling at attractive prices. These safeguard your money. So, if you have any capital or savings, make sure you invest them wisely so that you can benefit in the short and long-term. 

  1. Withdraw from your emergency funds or savings

If you are unable to generate extra income currently and taking a low-salary personal loan is out of the question, it is time to bring out the cushion of your emergency savings. Most of us have fixed deposits, recurring deposits, and other contingency funds. Liquidate these schemes and rebuild them again when the storm passes.

Indian households have always depended on their savings when the economy collapsed due to some unforeseen event in the past, and FDs are a crowd favourite and now’s the time to put them to use. What do you do if you don’t have an emergency fund? Start building one the moment the crisis is over. 

  1. Learn from today to plan for the future

The Great Depression of the 1930’s made many financially wise and last decade’s also had a similar impact on people and firms. Crises bring out the fallacies of an existing system and the COVID-19 crisis is showing the world the fragile nature of our current healthcare and economic systems. Make note of every financial struggle that you are going through right now.

Plan your future on those grounds and divert your resources to secure them. Is your current emergency fund enough? Do you need to revamp your health insurance? Is your job security flimsy? Are you paying too much in debt payments? Consider every struggle meticulously and lay out a solid plan.

  1. Avoid panic, no matter what

Yes, a financial crisis looms over the world, but panic has never solved any problem. It is due to the panic that people start overspending or hoarding things. Panic also leads to stock market losses, rash investments, unnecessary purchases, and falling into a debt-trap.

The logical side of your mind takes any financial decision and panic can hamper your logic and rational. You will want to access the situation calmly, count your resources, and allocate smartly to survive the downturn.

The World Health Organisation has already shed some positive light by saying that this is the only pandemic in history that is containable. The economic engine will run again soon, and our focus should be to get through the current crisis the best way we can.

This is an incredibly stressful time for most of us. But it is important to remember that this has happened before. Pandemics and recessions have resulted in terrible losses before. People did lose jobs before, but they survived. The current situation is not very different.

So, make smart choices and bank on your financial knowledge to bail you out. This is when you can actually hit the reset button, on your life, career, finances, and relationships. A lot depends on how you utilize it.