Saturday, May 18, 2024

Money management

Even as rising prices of essential as well as non-essential commodities is not a new phenomenon, the outbreak of war between Russia and Ukraine is triggering further price hike of consumer products. Experts having a close eye on the economic aspect of the war have not ruled out further escalation in consumer inflation. This is going to derail the economic recovery efforts after the virus-induced pandemic devastated every sector of the economy in the last two years. One of the major concerns that erupted immediately after the Russia-Ukraine war was the rise in the price of crude. Economists having a close eye on the emerging geo-political scenario in the ongoing Russia-Ukraine conflict have warned that increasing prices of crude oil and other commodities will have a cascading impact on raw materials and packing materials. Even as manufacturers and other companies will have to absorb the rising input costs of their production, it’s not ruled out that a substantial portion of price escalation in production cost will be passed on to the consumers. In other words, the brunt of rising prices as usual falls on the consumers. This is really imported inflation due to war, which is going to hit common consumers hard and there will be no relief from the rising inflation in the coming quarters. The pandemic has already created complicated economic uncertainties. On the one hand, many households have been rendered struggling for want of finances as their earning hands have either lost jobs or have faced drastic cuts in their salaries/incomes. On the other hand, prices of essential commodities, especially food items, have gone up considerably, making it difficult for the affected households to have sufficient quantity and quality of food for their consumption. The last two years of the pandemic have been most miserable for them. Now another inevitable situation has emerged due to the war between Russia and Ukraine and is going to add more to the high food price inflation at the retail level. This will leave a huge impact on the low and middle income segment of the population as they spend a major portion of their income on food. In fact food security has emerged as a critical issue. We all know access to healthy food and optimal nutrition for all is at the core of food security. Or we can say food security is dependent on a healthy and sustainable food system. When we talk of the food system, it is food availability, food accessibility and food affordability that constitute the pillars of food security. However, a lot of imbalances are visible in our food system as people have been facing difficulty to have physical and economic access to adequate amounts of nutritious, safe, and culturally appropriate foods. Shortage of food has even hit the people who carve out living by producing food. To be precise, food insecurity is going to be one of the biggest challenges to confront in the coming times as the kind of economic upheaval first triggered by the virus and now by the ongoing war is not going to end in the next two to three years. Loss of income has a direct impact on the assets of households and over a period of time they helplessly start losing the assets to fund their daily household needs. During the two years of the ongoing pandemic, households have been eating into their savings to keep their household budgets afloat. The financial health of households not only holds sway for its members, but it has direct bearing on the economic recovery process. A dip in household savings impairs their spending capability, thereby causing a dent in their future consumption. This all leads to jeopardizing the overall economic recovery efforts. Notably, the pandemic has already placed some important financial lessons and the emerging war driven situation prioritizes money management skills as an arsenal to stay afloat in difficult times. Here, the most basic and essential step during difficult time is to have a budget. Basically budgeting lies at the foundation of every financial plan. It’s about understanding how much money you have, where it goes, and then simultaneously planning how to best allocate those funds to realize different goals. Creating a budget always looks just a tedious financial exercise, that too when you feel your finances are already in proper order. But one might be surprised at just how valuable a budget can be.