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Budget wisely to tackle financial disruptions

india Updated: Jun 16, 2008 21:17 IST
inflation

There is bad news flowing in from all sides. While inflation has been rising steadily on one hand, the equity markets have been moving sharply — witnessing a fall from the record highs seen earlier.

The household budget is going haywire and there are increasing demands as cost rises for everything — from travelling to education. Has this position completely disrupted your finances or are you still able to cope with the situation. This is an important factor to consider because a lot depends on your actions.

Budget disruption

There is no doubt that a rise in the cost of various items will result in a jump in the cost that you will pay in several areas. If this inflation completely disrupts your budget and causes you to move towards despair then you need to take immediate action.

Planning it right

Every budget needs to have some amount of flexibility with a reserve thrown in to tackle tough times or unforeseen expenses.

A small disruption or even a jump suddenly in the costs should not result in the entire budget going off track. This can be possible only when you maintain a reserve and at the same time have some strategies in mind that will kick into effect to maintain a standard of living without seeing costs spiral through the roof.

Investment fall

Most people are avid investors in equity when things are going well. They get excited and start talking about the gain their investments have got them. There is also a lot of talk about the size of the portfolio and the shares invested in.

However the moment the market takes a tumble, many investors look all set to quit the scene in a hurry. Again financial planning for this area will mean that several possibilities are though up of and there is a plan ready to be put into motion in case there are sudden shocks that come to the market. This can also involve additional investments that will lead to better portfolio construction.

Additional assets

To remain financially stable, there is a need to take a look at several areas that might not be part of the mainstream investment. There is often a sudden drying up of liquidity in various markets and in such a position the individual has to ensure that there is investments and planning in such a manner that these additional investments provide benefits in terms of liquidity or cash flow or some other benefit as desired. Some amount of planning by providing for these areas is crucial.