You will write a one-page plan that sets out what you will do, and not do, when a downturn arrives.
Airline pilots do not work out what to do in an engine failure while the engine is failing. They run a checklist written long before, by people who were calm at the time. A household recession playbook works the same way. It is one page, written now, that tells your future self what to do and what not to do when a downturn arrives and fear is doing the thinking.
This exercise walks through the four parts of that page. Kumar and Shalini's playbook is the worked example. Their figures and choices are examples; yours will be different.
A trigger is a specific, observable event that tells you the plan is now live. Without triggers, you either act on every scary headline or wait until you are already in trouble.
Good triggers come from your own situation. The news is too loud to steer by. The indicators in lesson 4.2, Indicators to watch: GDP, hiring, inflation and the yield curve, tell you about the economy. Your triggers should tell you about your household. Examples are a retrenchment exercise in your team or department, a cut to your basic pay or variable pay, a hiring freeze across your industry, your partner's income being cut, or your company missing a payment or delaying salaries.
Kumar and Shalini chose three triggers. One: the plant announces a hiring freeze or cuts overtime for more than two months in a row. Two: Kumar's performance bonus falls by half or more. Three: either of them is told their role is at risk. Any one of the three switches the playbook on.
Go through your spending and sort it into three groups. Things you would cut first, things you would cut if the downturn deepens, and things you will protect no matter what.
Put the cuts in order. The first cuts should be painless and quick: subscriptions, eating out, the next holiday, upgrades you have not committed to. The second round goes deeper: smaller grocery bills, cheaper phone plans, pausing voluntary top-ups to investments. Write down roughly how much each cut saves a month, because module 5 uses those numbers to work out how long your cash would last.
The protected list matters as much. Lesson 4.4, Money moves that make sense in a downturn, and ones that do not, explained why insurance premiums belong here. So do loan instalments, because missing them is far more expensive than any cut, and essentials for dependants, such as school fees or support for parents.
Kumar and Shalini's first round cuts the year-end holiday, two streaming subscriptions and most restaurant meals, which in their example frees about S$700 a month. Their second round pauses their monthly investment plan and trims groceries, which frees another S$900. Protected: all insurance premiums, the mortgage, the children's enrichment classes and the S$400 a month they give Shalini's mother.
This is the part that stops a panic sale. Write one or two sentences that say exactly what you will do with long-term investments when markets fall.
A good rule has three parts: what you will do, what you will not do, and the only conditions under which you would change course. It should be specific enough that you cannot argue with it at two in the morning.
Kumar and Shalini wrote: "We will not sell long-term investments because markets have fallen. We will pause new contributions only if trigger two or three happens, and restart them within three months of Kumar's income returning to normal. We will only sell if our cash buffer runs out, and then we will sell the investments we need soonest first."
Notice what the rule does not say. It does not predict the market or tell them what to buy. It ties their actions to their own cash position.
The last part prepares for the worst case: needing a new job. Write the names of a few people outside your company you would contact about work, and the skills you would refresh first. Lesson 5.4, Skills and contacts are your income insurance, goes further into this.
Kumar listed a former manager now at another chip maker, two classmates from his polytechnic course who work in the industry, and a recruiter who placed a colleague. His first skill to refresh was a data analysis course he had been putting off.
One page, five short sections: triggers, cuts in order with the monthly saving for each, the protected list, the investment rule, and people and skills. At the bottom, a line for each adult in the household to sign and date.
Signing sounds theatrical, but it helps. A plan you have signed is harder to abandon in a panic than a note in your phone. Kumar and Shalini printed theirs and put it in the folder with their insurance policies, where they would find it when it mattered.
Set aside an hour this week, with your partner if you share finances, and work through the four steps for your own household.
Write the one-page recession playbook, sign and date it, and file it with your financial documents.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).