As families struggle through the current recession it is important to remember that this is not the first nor the last time that the economy will take a turn for the worse. In knowing this you should also know there are a few simple ways to prepare you finances to ensure you weather the current cycle and remain in a position to benefit when the economy takes it’s next turn; hopefully for the better.
- Have multiple streams of income- A few decades ago it was standard procedure to graduate from either high school or college and establish yourself with a company for the long haul. Those times have changes and if you wish to be financially secure it is important to understand the benefit of having multiple streams of income. Even if you have a great job with a great salary in times when the economy falters layoffs and downsizing become a reality many people are simply not prepared for. If you depend on just one source of income and you lose that income your finances can quickly take a turn for the worse. If you are fortunate enough to have a severance package you may be able to live off of that for a period of time, but you will eventually have to find another job and in the interim you may have to dip into your savings to survive.
- Diversity is the key- Similar to the first tip, having a diverse portfolio is the best way to protect yourself from losing everything in one fell swoop. The economy is simply not predictable enough at any time to have all of your eggs in one basket. Your age and the age at which you want to retire play a big factor in how risky you want to be in the market, but you should always spread your investments in a way that some money is safely tucked away slowly making more money.
- Manage your debt- An import lesson was brought to attention in the last year. Millions of people have learned that their spending and saving habits leave a lot to be desired. If you have debt now is the time to tackle it once and for all. If you can do it on your own by cutting costs and focusing serious energy and efforts toward debt reduction- then by all means go for it. Keep in mind that you will likely have to take a serious look at your lifestyle and make appropriate changes to ensure you do not dig yourself out of debt only to find yourself back in debt from using credit cards or overspending. If you are overwhelmed and your debt is making it impossible to move forward financially it is time to look into the various debt relief options available to you.
You may be thinking to yourself, I don’t need to hear anything about being tough in a tough economy, I’m doing just fine, and that’s what I thought too. My whole life I never got laid off and I never went without a Job unless I wanted to. Times are different now; you almost can’t be overly prepared.
So here are some of the things I wish I would have done a long time ago to prevent at least a little of the difficulty getting through this bad economy.
- Tip one- Never say it couldn’t happen to you. When you think you are invincible you aren’t going to make any preparations for the worst case scenario. You might be thinking, it doesn’t matter, even if I lose my job I can get another one very quickly, and hopefully you are right. My question to you is what if you are wrong, are you prepared?
- Tip two- Get prepared. Going through a really bad economy can be like going through a natural disaster, if you are like I was then you might say, I will always have someone to count on even if the worst happens. What if they are all going through the same thing? Developing a plan of action to rely solely on you is the only way to go. It’s nice if you can rely on family and friends but you may not be able to.
- Tip three- Don’t live in denial. I can’t believe how many people, even when times are tough, still spend money they don’t have. You can’t bury your head in the sand. Be prepared to make extreme sacrifices. I had to sell almost everything I owned and at first I was devastated. Some of the things I missed, but I soon realized that most of the stuff I got rid of I didn’t even notice. I actually am glad I don’t have so much junk now, later when the good times are upon you again you can re-buy the things you really miss.
- Tip four- Have the right mindset. Having a long term perspective about it all will make a difference. I’m sure it feels like the end of the world now but I learned from my own experience that very little of what I thought mattered actually did. Keeping a positive frame of mind will ensure that you get back on your feet as quickly as possible.
- Tip five- Learn from the experience. I have had some of the greatest personal growth in my life during the tough times of the bad economy. I learned so much about myself, and my ability to persevere. I also learned what mistakes I will not make in the future. Every experience in life has a lesson to teach if you are willing to learn, even the bad ones.
Economies shift, markets vary, and the only thing that is constant is change. If you prepare during the prosperous times you will be more ready for the lean ones. When all is said and done, no matter how the bad economy affects things in your life, you will overcome it all in the end.