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How to recession proof your life.
By : Khawar Nehal 
31 May 2011.

Emergency Fund

Have an emergency liquid fund. This means 20% of your values should be in Cash at home, and spread out in at least 3 banks in different countries incorporated in opposite sides of the earth.

Live in your limits. 

Divide your expenses into three areas. Needs, wants and desires.
Most people tend to place more than their real needs in the needs area. Most of the expensive stuff is usually in the desires area. Example everything which more than 90% of you neighbors cannot afford is most probably a luxury and can be placed in the desires column.

Do not budget more than 30% of your income on expenses. And make sure you budget at least 20% of your income into your needs. Use the envelope method for expense control.

Make sure you have only one credit card and that is topped up with cash in the bank. Use this credit card for only these three areas : 

    1. There is no other way to pay like internet shopping.

    2. It is too dangerous to carry cash. Like touring difficult areas. You can carry cash and take travel insurance. It may be cheaper than the accidental credit card charges which accumulate.

    3. You cannot pay someone else cash to use their credit card for the transaction.

Have at least three sources of income. 

This is called diversification. One basic like a food business or a simple job. One medium like a car rental company and the third a value added company like an ecommerce business or a venture capital.

Do not invest more than 10% in high end high risk venture capital which claims to pay more than 50% per year returns on investment.


Take a long term view of investments.

Invest like you are going to stay in the business for at least 10 years. If you do not intend to finish something then do not start. Most probably for awesome returns you need to stick around in the business for at least 20 years. At least 5 years to start making a return on investment.

Do real risk management.

Most of the losses are because the risks are not calculated completely and properly. If at all.
This takes time and patience but is the best way to make a profit.

Have a high trust level.

Business runs on trust. If you lose and you have committed to pay back, then pay back from your other profits to clear old dues. This way you shall always have a line of credit. If you have a high trust level an no credit line available, then you can safely assume that the world is in a recession/depression and there is no way the common person is going to get a loan on any sane terms.