How to Protect Yourself and Lighten the Impact of a Financial Crisis

In a troubled world, it was yet another unsettling moment when International Monetary Fund (IMF) Chief Kristalina Georgieva announced that one-third of the global economy was expected to be in recession by the beginning of 2023.

Is another economic crisis on the way? It may have different origins but it would still inflict the kind of anxiety and pain caused by the Global Financial Crisis of 2008 or the lesser known but equally dire consequences of the Asian Financial Crisis in the late 1990s. In the latter, the Thai currency nose-dived causing waves of economic turbulence that were felt around the world.

Closer to the eye of the economic storm, political and social pressures erupted, re-opening old ethnic wounds in Indonesia.

Between July 1997 and August 1998, the Jakarta Composite Index fell by 75% as a result of a 13.1% decline in Indonesia’s GDP, which caused a stock market crash. In addition, the crisis contributed significantly to a rise in unemployment in the affected nations. For instance, the unemployment rate in Indonesia increased from 4.5% in 1997 to 15.4% in 1999.

Suggested read: The Noah Principle is a remarkable book that unflinchingly depicts the harsh realities of life in Indonesia at that time. The novel emphasizes the ethnic strife, cultural prejudice, and economic mismanagement that continues to impede humanity’s progress to this very day. However, there are still important lessons that can be learned from Indonesia’s understudied experience. Everyone knows that history can teach us important lessons, but in order to learn from history we must be motivated to ask the right questions, no matter how uncomfortable the process might be. The book is a good resource from which those uncomfortable questions might be derived. The Noah Principle is available for purchase on Amazon.

It is difficult to remain unscathed by any economic downturn, but there are ways to protect yourself by reducing their potential impact on your assets.

Create An Emergency Fund

Creating an emergency fund is among the most critical steps in preparing for a financial crisis. This is a savings account that you set up, especially for unforeseen costs like medical bills, auto repairs, or lost employment. Ideally, you should have three to six months’ worth of expenses covered by your emergency fund. The Washington Post claims that having an emergency fund can prevent you from incurring debt or from having to liquidate assets during difficult times.

Establish A Budget

Making a budget is another intelligent way to prepare for a financial crisis. A budget is a strategy that describes your monthly income and expenses. You can monitor your spending, find areas where you can make cuts, and increase your savings by creating a comprehensive spending plan. Therefore, you should create a budget that encompasses both necessary expenses like housing, food, transportation, and utilities as well as optional ones like entertainment and eating out.

Reduce Debt

Having debt during a financial crisis can be very difficult. It is therefore, critical to pay off any high-interest loans or credit card debt as quickly as you can. According to the American media website CNET, paying off high-interest debt comes first when prioritizing debt repayment. Additionally, you can bargain with your creditors for more affordable interest rates or payment schedules.

Diversify Your Income

In times of financial difficulty, having several different sources of income can act as a safety net. Consider starting a side business or taking on a part-time job if you already have a full-time job. If possible, try to investigate opportunities in the gig economy, such as ridesharing or freelancing. By using this strategy, you will not only be able to increase your cash flow but also develop knowledge and experience that will be helpful in the long run.

Invest In Your Future

A financial crisis can be challenging to survive, but investing in your future can help you do so, and emerge stronger. In order to lower risk and safeguard your portfolio, it is advisable to diversify your investments. Therefore, think about making an investment in a brokerage or retirement account that can increase in value over time.

Seek Professional Help

Do not be reluctant to seek professional assistance if you are experiencing financial difficulties. A credit counselor or financial advisor can offer direction and service. They can assist you in developing a strategy to handle debt, accumulate savings, and safeguard your assets before it is too late.

Stay Positive and Flexible

Last but not least, staying positive and flexible during a financial crisis is critical. Remember that tough times are temporary, and the economic climate will eventually improve. Be open to new opportunities and willing to make changes to your lifestyle and spending habits. You can take inspiration from Cain and Charlie, the two central characters in The Noah Principle. Trying to build their futures, with accelerated career trajectories in Jakarta, the two young expats become embroiled in a deadly battle of wits between their bosses. At the same time, they must also try to navigate Indonesia’s stormy climate of economic chaos and intensifying ethnic violence as they struggle to maintain some semblance of the successful futures they dreamed of.

Although they can be frightening, economic downturns are not insurmountable. You can lessen their personal impact and emerge stronger and more resilient by taking the precautionary measures outlined in this blog. And for more information about what happened to the world in the wake of the Asian Financial Crisis, purchase a copy of The Noah Principle from Amazon.

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