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5-point safety kit to shield you from financial crisis

This article tells you five ways ­ maximise liquidity, minimise monthly bills, restructure credit card debt, know your non-cash assets and rethink insurance needs ­ to prepare for the worst.


Maximum liquidity: When tragedy strikes, people often scrounge for cash as they need liquidity. Experts advise individuals and families to maximise liquid savings.

So, cash accounts like checking, savings and money market accounts, as well as certificates of deposit and short-term government investments, will help you the most in troubled times.

How many months' worth of cash do you require?
As a thumb rule, a three-month expense cushion is considered bare minimum while a 9-12 month cash pile in liquid savings will protect against a lengthy stretch of unemployment.


Minimum outgo: If one makes a budget, then you will know exactly where the flab is when it comes to monthly expenses. Find out exactly how much money is coming in and going out each month. Then, start looking at your budget and see where you might currently be wasting money.

For example, are you paying Rs 300-400 a month for a landline you never use? That's some flab right there. Track your grocery bill and fuel bills. Instead of frequent trips to the neighbourhood grocer, try to go once.

If you are young, a critical insurance rider for your mediclaim policy could be delayed for some years, he adds.


Kill credit cards: Yes, they come in handy but interest charges of a credit card is likely to take up a significant portion of your monthly budget.

Track the cycle so that one does not miss out on payment dates.


Schedule electronic payments or mail checks so your payment arrives several days before it is due.

This way, if a delay occurs, your payment will almost certainly still land on time.

If you're currently carrying a balance, it could really help you to relocate that balance to a new card with a lower rate. Paying less interest means you can pay off your total debt faster and/or gain some oxygen in your monthly budget


Non-cash value: Taking stock of your non-cash assets and then maximising their value is also a smart option.

Non-cash items could mean frequent flyer miles (if travel is required), unexpired pre-paid gift cards (as good as cash at point of sales), loyalty card privileges (can help reduce bills in select outlets).

In times of great need, all of these assets can assist you lower monthly expenses. It is important to see what you have and how much cushion do they give you. Earning hard cash during a crisis is difficult so non-cash assets could come in useful. These options allow you to create value out of thin air.


Too much insurance: While in an under-insured country like India most people carry less of insurance than more, shopping around for a lower insurance rate is no crime.

Look up on the web and you can immediately find out whether you are carrying too much insurance or if you could be getting the exact same coverage for a lower price. But please ensure that having good insurance coverage can prevent one crisis from piling on top of the other. Don't get rid of a disability insurance policy just because you can't find places to cut premium.

 

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