How to cope with tough economic times

Happened to read a blog on how to cope with tough economic times and thought it might be useful for you,

By now, not many people need a reminder that times are getting tougher. Unfortunately, I believe it is going to be much worse before it gets better. We did not arrive at this moment overnight, nor, as our Finance Minister insists, due to unforeseen circumstances. It was a perfectly predictable sequence of events that led to the present inflationary mess, and since our diagnosis of the root cause is all wrong, most of the attempted remedies are going to make the situation worse.

So what we can we do? Here are some rough guiding principles. I hope things won't be as bad as I say, but it is still worth being prepared.

1. No IT professional should assume that their paychecks will grow the way they grew in the past 4-5 years. It is possible for paychecks to stagnate, even fall.

2. No IT professional should assume his or her job is perfectly safe. This industry will likely witness layoffs. There are way too many "make work" projects, and I hear repeatedly of people sitting on the bench for months. We recently interviewed a candidate from a big name firm, who has not even been given a computer, after 8 months on the "job". Instead, he is asked to spend time in the library, improving his knowledge. I also heard of people whose managers tell them "Look, I don't have enough work myself, so why are you bothered?"


3. Prices of essential commodities will likely increase even further. Stagnating wages, sluggish job market and rising prices will make for a miserable time. The best way to conquer this is to cut down non-essential expenses. If you are the type of person who absolutely, positively have to replace that cell phone every 6 months, even every year, rethink your priorities in life. This is not to say you have to become a sanyasi(n), but it is a useful practice to start living on less. I assure you, it is fairly easy to train yourself to be frugal, if you set your mind to it.

Start finding ways of enjoying life without spending a lot of money. For example, watch a movie at home with friends, rather than blow money at Mayajaal. Eat with friends - but preferably do it at home, with each person bringing one item. I learned all of these as a PhD student on a stipend. You can enjoy life just as much, without spending all that much money.

4. Cut down on driving - combine trips, pool together with friends. It will cut down your stress level, keep you safer, and also cut down expenses.

5. Pay down your debts first. Reducing debts is always good, but it is essential to face a downturn well.

6. Wedding expenses: I know this is a major source of spending for many of us here. If you are a man, unilaterally tell the bride's family to go easy on wedding expenses. Be a real man, offer to share the expenses. Most importantly, restrain your own family from demanding the moon - like that ultra-super-expensive music band for reception, that super-premium caterer and so on. Yes, it takes some guts, but this is a good time to display it. Your future wife will appreciate it.

If you are a woman, insist on a simple wedding with your groom. If a guy lacks the guts to accept it, reject him. You will save yourself a life-time of trouble with a coward. Remember that there is a shortage of girls, because of the fairly widespread practice of aborting female fetuses, so you actually have leverage. Use it wisely.

7. After repaying debts, if you have savings, buy some gold as a hedge, particularly when gold prices dip. Not necessarily gold jewelry, because that may be overpriced, but gold coins & bars. Gold is a hedge against government making a total mess of things, which, alas, is very likely.

Gold should not be thought of as an investment - it is a way to safeguard your savings from being destroyed by inflation. Gold prices can also fall, so do not buy gold with borrowed money - that would be very stupid. Instead, think of gold as an insurance policy.

8. Those of you who come from rural places, and have an agricultural background, think about buying a few acres of farm land, provided you do not overpay for it. This advice only applies if you actually have someone who can take care of it, and actually farm it. If it costs Rs 15 lakhs an acre, it is not farm land, it is speculation. Do not get deluded with "Velachery land costs 20 crores per acre, and in my village it is only 20 lakhs an acre, so it is a bargain". That is stupid thinking. I would buy only at 1-3 lakhs per acre - at which price you can actually eke out a profit from agriculture, if you are careful.