Wake up! What's happening?

The current state of the economy has thrust us all unwillingly into an unfolding story, one that we are witnessing firsthand. The term "Recession" may seem like a distant concept, but it's crucial to take the time to understand its implications. This is not just an economic term that doesn't affect us or is too complex to grasp. The alarming number of layoffs taking place should make it clear that this recession is hitting close to home. Just take a look at LinkedIn, where the majority of posts you see are tagged with #opentowork. It has even made its way into our display pictures, highlighting a streak of layoffs across the board.

Why are we all part of this story? A recession is like a chain reaction, just like the firecrackers we light during Diwali or a line of dominos. It starts with an unrelated event somewhere else, but its effects ripple through various sectors and impact us in some form or fashion while gradually shrinking the economy. As people lose their jobs, their ability to purchase goods and services diminishes. This, in turn, causes other companies to shut down. Consider the simple example of a restaurant near your workplace that you used to frequent. As business dwindles, the restaurant staff may face layoffs. On a larger scale, when people stop buying houses, the real estate market crashes with no takers. It's a domino effect where macro-level events lead to micro-level consequences. You may have also noticed that everything has become ridiculously expensive, be it tomatoes priced at 100 INR or diesel at 105 INR. Even a basic hatchback car costs around 10 lac INR. The price hikes for fuel create a cascading effect, making everything more expensive and raising the cost of essential commodities. The vicious cycle continues, affecting various aspects of our daily lives. Inflation and recession go hand in hand.

So, what can we do in the face of this situation?

The good news is that recessions are not permanent. They are cyclical, characterized by periods of economic growth and downturns. It's a natural phenomenon, and like every storm, it will eventually pass. It is essential to educate ourselves on the topic and understand the events of past recessions, such as the "Great Depression" and the "Lehman Brothers" crash. If you want a good starting point, watch "The Big Short" on Netflix which is about corruption and systemic failures, but the ripple effect of recession is clear.

I think it is important for us to look in the mirror and assess our circumstances, make course corrections, and take action to weather this storm.

Here are a few suggestions to consider:

1. Build an emergency fund: Ask yourself if you and your family can sustain a job loss for 3 to 6 months without having to borrow money. If not, take proactive steps to save and create a financial cushion for unexpected events.

2. Tackle credit debt: If you have recurring and never-ending credit card debt, prioritize paying it off immediately. The high-interest rates associated with such debt can be killing. Use your credit card like a debit card, paying off the balance in full each month. Take advantage of the rewards or points offered by credit cards while ensuring timely payments. Banks will not appreciate it because they do not earn interest and that is not a bad thing.

3. Address massive loans: Dealing with significant loans can be challenging, but it's essential to tackle them head-on. Adopt a frugal lifestyle, allocating bonuses and tax returns towards paying off your debts. It may be a tough journey, but the sooner you eliminate these burdens, the better your financial situation will be.

4. Save for the long term: While it's tempting to postpone long-term savings as a "later problem", it's crucial to set aside funds for retirement, you'll get there faster than you think. Start small and be consistent. You'll be surprised at how quickly your savings grow over time.

5. Reevaluate your housing expenses: If you're paying an exorbitant amount towards rent, consider exploring alternatives. Look for a similar house that may be slightly farther from your workplace but offers reduced rent. This adjustment can make a significant difference in your monthly expenses.

6. It maybe prudent to put those big plans like the shiny new car or house on hold for a bit for obvious reasons.

These are not foolproof solutions, but they can help alleviate some of the financial burdens during challenging times. Each individual's situation is unique, so tailor these ideas to fit your specific circumstances. Remember, we are all in this together, and by taking proactive steps, we can navigate through this storm and emerge stronger on the other side.

Wishing you all the best in your journey ahead. See you on the other side!

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