Recession Mis-advice

Authors on finance blogs and elsewhere keep giving unclear and wrong directions in these times of crunch.

  • Don’t use your credit card – keep away from debts.
  • Cash savings or liquid funds for 3 to 6 months of survival.

First one: using your credit card for everything you possibly can use it for it really the best thing to do. Multiple reasons. My point as to why you should do it in crunchy times also is that if you are paying your bills on time and have an equivalent cash amount always, it helps you further more if you can keep your cash balances in while the credit card stays on the table. My rule is to keep as much money with me as I can – and to pay off any debts as soon as they are due.

Next: it is outright stupid to have any cash or liquid funds anywhere which amount to more than a month’s spending. Your credit card should take care of almost all your needs, and a month’s worth of cash is really enough at all times. Anything extra should be put into a recurrind deposit (if you are of the failsafe kind) or into a debt mutual fund (or an equity fund if life is about risks to you). Fund redemption takes only about 2-3 days.

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