Here are 4 tips to recession-proof your finances in 2025

We have all been reading about job losses quite often these days. Nobody knows when the COVID-19 pandemic will subside, allowing the economy to recover. Everyone is concerned about the potential effects of a recession that has been projected by many financial experts. However, as individuals, we can ease the pain of this recession by taking a few steps, such as investing in the best SIP plans and doing better financial planning for our future. These habits and strategies will help us and our families combat this economic slowdown much more efficiently.

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Below are some experts' recommended tips that can recession-proof our finances in 2025:

Manage SIPs wisely:

Many investors require clarification on continuing their SIP investments. This doubt is justified by examining how most SIPs that started three years ago are in the red. However, discontinuing a SIP during this hour would be a big mistake on an equity investor’s part. This step defeats the purpose of having a SIP, as it prevents the investor from accumulating more. Arithmetically, the best SIP plans prove to be highly advantageous during downturns. As the Net Asset Value of the funds decreases, SIPs result in more units being allocated to their investors. These accumulated units may transform into massive amounts in the future when the market recovers. Many investors in the past have benefited from sticking around during lean phases. Therefore, investors should not discontinue their SIPs during this hour and should consider investing in some of the best SIP plans to reap the benefits when the market stabilises. Many experts also suggest that investors should increase their SIP amounts to benefit from the correction later. 

The returns are expected to be modest for investors with a time horizon of 2 to 3 years. Those whose target goal is arriving soon should consider withdrawing or transferring the accumulated amount to a liquid fund.

All in all, this market volatility can benefit all SIP investors, making it a bad idea to discontinue their SIP Plans. Instead, we should consider exploring and investing in some of the best SIP plans.

Clear the debt:

Apart from applying for the best SIP plans, clearing the debt is another smart choice. The economic slowdown is causing many people to lose their jobs. This fear of unemployment, together with the stress of being under obligation, can be fixed by paying down all the outstanding debts. This habit provides peace of mind to individuals and is generally a very healthy habit. Clearing off debts will save individuals from a significant amount of interest during this period of slowdown and make room for more important expenses. 

Less volatile funds:

Hybrid funds are the best bet for investors who do not have a cast-iron stomach but want exposure to equities. These funds protect the investor by limiting the volatility in the returns. There are various types of hybrid funds. One of them is the balanced advantage fund or the dynamic asset allocation fund. These funds invest in both debt and equity, in varying exposure ranging from 0 to 100%. Thus, these funds can adjust according to their volatility. Multi-asset funds are another type of hybrid fund that invests in gold, debt, and equity in varying proportions. These funds cover a considerable amount of asset diversification. Another type of hybrid fund is the equity savings fund. This fund mixes shares, equity derivatives, and fixed-income avenues. Stocks and equity derivatives form 65% of this fund’s portfolio.

Financial experts recommend investing in the best SIP plans, balanced advantage funds, and equity savings funds, which are the most suitable options among the funds mentioned above. These funds are better suited to facing the downside and are also tax-efficient.

Reduce unnecessary spending

A penny saved is a penny earned. Therefore, in these hours of economic slowdown, people should minimise their expenses and maximise their income. Individuals should reduce their discretionary costs by making suitable adjustments in their lifestyles. It is surprising to see how much we can save as individuals by reducing unnecessary costs, such as dining out or buying more clothes. Forgoing the premium memberships of many food delivery and video streaming applications is another way to save money. 

People should also consider holding off on plans to purchase a house, a car, or a vacation until the economy is secure. Postponing these significant ticket expenses or considering alternative options, such as pre-owned or refurbished products, can help reduce the expenditure.

Another crucial thing to keep in mind is not to buy anything in anticipation of future income or wealth. This means that people should refrain from financing their purchases in the hope of their increments, bonuses, etc. They should also avoid using credit cards for significant investments in this uncertain time. Instead, by investing in the best SIP plans, you can utilise the returns accrued to fund any unnecessary spending that is currently being deducted from your primary source of income.

Already, several companies have warned their staff about potential cost-cutting measures and the possibility of staff downsizing. Since nobody knows how bad things can get, we should be ready for the worst to come. A wise individual will not make provisions for only a month or two, but at least a year by either cutting expenses, investing in the best SIP plan available, or both.