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Mental framework for your finances in crazy times

Photo by Kenny Eliason on Unsplash

We are currently in a crazy world situation right now which has never happened before and no one knows where things would go or how to react to them. Inflation is running at rampant high numbers and people are simply losing cash value, supply chain issues haven’t yet been completely resolved post-pandemic and to top it all we are having this unreasonable war. Economists believe a recession is likely to hit in the coming times and if it does no one knows who and how will they get affected. Some say it might hit us by July/August, and some say it might be next year, but that’s the catch about any of these financial predictions, the majority of the time they are not right. But there are signs which indicate the times are not that good like layoffs and hiring freezes, Energy shortage issues, Chip shortage issues, Food shortage issues etc. One thing is true there are literally no positive signs for a rosy economic environment.

The best thing everyone could do is brace for impact and as they say, you should always have a backup plan. Here are some of the things one should think about to keep themselves as protected from the situation as possible. Hopefully, this write-up helps in having that mental framework to deal with crazy times like the one we are in.

Primary Career

If you are an employed individual, It goes without saying, now is not the time to slack off or complain. Instead, think like the top management and make valuable contributions which not only make you a valuable team member but also helps the business/company wither this unknown storm. It will help you on multifold levels. It will help you grow in your career and your relevant skillset levels also get elevated. Let's say you are valuable but still get laid off because of unavoidable circumstances, chances are you will be called back when things get sorted again otherwise you still might have to go back to all the painful processes of interviewing funnels. When a situation like a recession hits and the business/companies start struggling with their revenues, Layoffs are the natural way of cutting costs and non-important/non-core roles are the first ones to be affected. You have already witnessed this during Covid times. If you are in one such role then you should think about upskilling yourself and think about doing valuable contributions to the org as per your capacity.

Invest time in upskilling yourself in your relevant career field, which not only makes you more valuable but also prepares you to be ready i.e. marketable when the time comes.

Emergency Fund

I cannot stress more on this fact on how important a stash of emergency funds is. I have talked about it here. It highly relates to the first point above. However unfortunate it may be, if suppose you get relieved from your position because of cost-cutting reasons or the business gets shut down, it is a scary situation to not have that paycheck anymore the next month. How do you afford all the bills and how do you survive till you find some gig if you don’t have any savings? This is where your emergency fund will help you.

Ideally, it is suggested to save 3–6 months of expenses to give you a safety net till you figure out your next gig. If you don’t have this then would highly recommend putting this your highest priority now. Calculate your rough monthly expense and start saving for at least 3 times the amount. 6 times that amount would be best. Put that amount in a savings account or anywhere which is easily liquid and can be easily accessible when you need it. Recession or not, an emergency fund is a must for your good financial health.

Side Hustle / Passive Income Streams

This topic is hard and will stress out most of you but let’s imagine depending/surviving only on your current paycheck and one fine day you don’t have it anymore, it’s a catastrophe to have this single point of failure.

We are lucky to be in a generation where there are loads of opportunities for work and some of them could be some side hustles which might just need a few hours a week. You could also work on setting up some passive income streams. Passive engines do require a lot of time and hard work initially but once set up you wouldn’t need to actively manage them anymore. Your primary work might be serving you the majority of your income but some cash coming in from these streams would be a relief and you never know, you could slingshot to it in future as well if it works out really well for you.

Track Spendings

Tracking your spending is a great way to know where is your money going, There are loads of apps out there which help in tracking via categories. This will at least help visualise what are the different items you are spending your hard-earned money on and will help you calculate easily what to cut off. This will also tell you how much money you need to save for your emergency fund. This can also help you to calculate how much time you can survive with the current money you have.

Pause Purchases for a while

It would be highly recommended to pause any big-ticket purchases right now. Would be an absolutely foolish step to buy that dream car or house at the expense of making your pocket/bank account dry. Delay the big or luxury purchases for some time if you don’t have an emergency fund. Don’t even think about getting big purchases with financing or EMIs. If you are not able to pay them later on if things go south, that would hurt your credit score big time.

Stay on the sidelines for a while with your money and wait for a good time to do those if you don’t have a backup or are not very rich.

Start implementing money-saving techniques

If you are generally not able to save every month then it's highly suggested to use some of the money-saving or frugal techniques. Stuff like cutting down on eating outside, cutting down on junk food purchases, cutting down on unnecessary purchases like not getting swayed with sale banners of clothes or shoes(chances are you don’t need them right now). Think about what you need vs what you want. You can cut down on your wants.

Reduce energy and utility consumption, Cancel automatic subscriptions, Check discounts on groceries, lower cell phone bills, Skip the coffee shop, Sell items you don’t need etc. are some of the other ways.


Disclaimer: I am not a financial advisor below are just my opinions and framework which work for me

If you are invested in the markets, the best advice would be to stay invested. Always look at the bigger picture of why you got in the first place. Was it because of short-term returns?

S&P index in relation to market corrections

No one can time the market that’s why DCA as a strategy exists. Read this thread for a beautiful comparison of when you time ups vs bottoms vs regular investing. If you are investing in a broad market index or ETF stay invested if you can.

If you are invested in individual stocks, right now would be a great time to collect information and reevaluate your strategies. This would be a great time to observe how these companies behave. History has shown us plus simple math tells if a company has a good amount of net cash flows, it might survive and can navigate the storm at least. This is a time that will also help you realise your risk-taking capacity. Observe that and reevaluate your portfolio.

For Cryptocurrency, I am personally invested and my strategy here is not changing at all for now. It's the same, I keep buying in a staggered way at diff price levels but also keep a monthly limit. For me, I look at the yearly lows instead of the highs as a perspective or benchmark so that my expectations are not high. For you, it might differ.

Bitcoin’s yearly low bar chart(Bit outdated)

If you are starting investments, IMO this is the best time if you have the money, however, deployment should be staggered and not all at once. Invest in Cash Rich big companies. A little fundamental analysis and you could find some companies like these . Best way would be to be a blind monkey and stay invested in Indexes or ETFs if you can take a risk or look for safer, debt instruments like savings, FD, gold etc.

Be Aware

Finally, it would be great to at least be aware of the current conditions, because it helps you plan accordingly. You wouldn’t want a surprise coming your way and be not prepared for it. It doesn’t hurt to be a little aware of your finances and economic conditions around you and in general, the country you live in. Read about news on economic conditions.

Fingers crossed that we all sail by these tough times without many issues and nobody is in a situation of hardships. Hope this article helps with a mental framework to navigate such times. Would love to hear in the comments if this helps or if there’s something I could add here that I might have missed.



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Hemansu Kumar Tanty

Hemansu Kumar Tanty

I find myself entangled amongst Software Engineering, Travel, Photography, Fitness, Personal Development and Wealth Management.