Sooner or later almost every household has a year where less money comes in than went out the year before. A business goes quiet. A crop fetches less. A job ends. Hours get cut. In twelve years I've had this conversation in a lot of living rooms, and the first thing people say is nearly always the same: stop everything.
I understand the instinct. It feels like action. But stopping everything is rarely the right first move, and it's almost never the whole answer. There's an order, and it takes about twenty minutes to go through.
First, work out how long
Before touching anything, the useful question is how long this is likely to last.
Three months of a quiet business is a different problem from a job ending with nothing lined up. A season where prices were poor is different again, because you know roughly when the next one arrives. The answer doesn't have to be precise. It just has to be honest.
That number decides everything that follows. A short gap is a cash flow problem. A long one is a plan problem, and the two get handled differently.
Second, use the buffer
This is what it was built for, and people are strangely reluctant to touch it.
I've sat with households who were borrowing at a painful rate while a perfectly good emergency fund sat in the bank untouched, because spending it felt like failure. It isn't failure. It's the fund doing its job. Our page on building an emergency fund exists for exactly this month.
Use it, and keep a rough note of what you've used so you know how much runway is left.
Third, cut the spending that can be cut
Ordinary, and it has to come before touching investments.
Some expenses are fixed. Rent, fees, existing loan payments. Others are flexible in a way people forget until they look: subscriptions, travel, upgrades that were planned for this year and can wait for the next one.
This step does more than save money. It tells you the real size of the gap, which you need before deciding anything about investments.
Fourth, reduce the instalments. Don't stop them.
Here's where I usually disagree with whoever the household has already spoken to.
Stopping a SIP feels like it saves the whole amount. It does, for that month. The problem is what happens after. In my experience an instalment stopped in a bad year stays stopped long after the bad year has passed, because restarting requires a decision and nothing forces the decision. Our post on restarting a SIP you stopped is entirely about that pattern.
A reduced instalment does something different. It keeps the arrangement live, keeps the bank mandate active, and makes going back to the full amount a single instruction when things improve. Our page on types of SIP covers reducing and pausing where the provider allows it.
Even a small amount. I've had households drop their monthly amount to a fifth of what it was for eight months, and every one of them raised it back within a year. Almost none of the ones who stopped outright did.
Fifth, protect the dated money
Some money in a household has a name and a date on it. School fees in April. A wedding next winter. A loan instalment that must be paid.
That money does not get touched in a bad year, even though it's often the easiest to reach. Once a dated pot has been used for something else, it very rarely gets refilled, and the date arrives anyway.
If the gap is so large that dated money has to be used, that's not a month for tidy advice. That's a conversation about the whole plan, and probably about borrowing.
Sixth, and only then, redeem
If the buffer is gone and the gap continues, then yes, something has to be sold.
Two rules I'd hold to. Redeem from the steadiest holding you have, not from whatever has fallen the most, because selling after a fall converts a temporary movement into a permanent one. And redeem only what you actually need for the next stretch, not a round figure that feels comforting.
Also worth knowing: you can take out part of what you hold and leave the SIP running. They're separate instructions, and a lot of people don't realise, as our post on stopping a SIP and withdrawing money explains.
What about the borrowing?
It depends entirely on what it costs, and there's no general answer.
Credit card outstanding or an informal loan at a heavy rate almost always deserves to be cleared before anything else, including continuing to invest. A home loan at an ordinary rate usually doesn't. Our post on SIP or prepay the loan works through the comparison.
What I'd avoid is new borrowing to keep investments going. I've seen it, and it's the one combination that reliably makes a bad year worse.
Tell the people who need to know
Two of them, and both get left out.
The other adult in the house, because a reduced instalment or a redemption changes the household plan and they will find out eventually anyway. I've seen the version where one partner quietly stops everything and the other discovers it a year later. That conversation is worse than the original problem.
And whoever handles your investments. Not for permission, just so the paperwork is done properly and nothing is stopped that didn't need stopping. Half the reductions I process take five minutes and save somebody from cancelling three SIPs they'd have restarted badly.
Where people go wrong
Three patterns, all of them understandable.
Stopping everything on day one. Fast, feels responsible, and usually means the plan never restarts.
Doing nothing at all, and funding the gap on credit while the portfolio sits untouched. This costs the most and I see it more than you'd think, because looking at the numbers is unpleasant.
Selling whatever has fallen most, because it feels like admitting a mistake and getting out. It's the single most expensive move in this list.
One more thing, about the next year
When income recovers, put the instalments back before the money finds somewhere else to go.
The week the income returns to normal is the easiest time to restore the old amount, because the household is already used to living without it. Wait three months and the money has been absorbed into ordinary spending, and raising it back feels like a cut.
And if the year taught you that the buffer was too small, that's worth acting on. A household that has been through one lean stretch usually builds a bigger cushion afterwards, and it's the most useful thing that comes out of a bad year.
If you're in one now
Write down how long you think it lasts, what the monthly gap actually is, and what you hold. That's it, on one page. Almost every decision becomes obvious once those three things are in front of you.
And if you want a second pair of eyes on it, send it over. Myfolios is an AMFI-registered mutual fund distributor (ARN-145870) working from Indore since 2014. There's no charge for the conversation, and in a bad year the most useful thing I do is usually talk somebody out of the drastic version of what they were about to do.
