April 1st, 2008
Many banks have suffered tremendous losses as a result of the subprime lending mess. Some are saying that the worst is over. Can that really be true already?
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February 21st, 2008
A recession economy doesn't have to destroy your financial security. In fact, sometimes a recession can help grow your financial security.
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February 17th, 2008
If you don't know what a recession is and how the very definition of one affects you, read here.
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February 16th, 2008
A short guide on what to think about the upcoming recession and how to keep your sanity intact until it is over.
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In the current economy, there is a high probability of a recession happening. Many of the experts agree that the chances for a recession hitting this year are very real. For some people this could mean the loss of jobs, homes, or part of their retirement savings. However, if you are prepared for a recession, you can minimize the damage to your financial situation. Here are ten things you can do to help recession-proof yourself.
1. Refinance your debt - If you bought a house in the last few years and didn't get the best interest rate, now might be an excellent time to refinance. Mortgage rates are very low. 30 year mortgage rates are still below 6% and switching your mortgage from a variable interest rate to a fixed rate could bring some significant long-term savings in your monthly budget. Even saving $100 a month would quickly add up to $1,200 a year.
2. Improve your education - One of the best ways to protect yourself from a recession is to increase your job skills. By gaining higher educational credentials or new job skills, you will make yourself more marketable in the event of having to find a new job. Also, improving your credentials and job skills could allow you to get a promotion or a different job with higher pay.
3. Build Your Nestegg - In the event of a major or minor financial crisis, it is always good to have something to fall back on. While putting money into a savings account isn't the sexiest way to save your money, it can be a lifesaver if you fall into dire straits. Savings accounts are completely liquid assets, so you can access the money whenever you need it. Stocks and mutual funds don't have the same luxury. It would be good to save up two or three months equivalent of your income in a savings account. That way, if someting unfortonate happens, you have something to fall back on in the short-term.
4. Eliminate Your Debt - While many people think that having debt is ok, you must remember that your monthly payments are due whether you can afford them or not. If you lost your job in a recession, you still have to make your payments or face stiff penalties. By working to eliminate your debt now, you will have greater financial freedom in a moment of crisis. Start today by eliminating your highest interest rate debt first and working your way down from there.
5. Improve Your Income - Reducing your monthly expenses by removing debt is the first half of the recession-proofing equation. The other half of the equation revolves around bringing in more money. Simply put, the more money you make, the quicker you can pay off debt, build your nest egg, and recession-proof your life. The obvious way to do this would be to pick up overtime at work, get a second job, or even better hire out your time as a consultant. For example, many accountants earn extra money doing taxes during tax season.
6. Invest In Real Estate - Right now our economy is experiencing a dramatic housing bubble burst. If you pay attention to the news, you've probably seen reports of forclosure rates rising. Believe it or not, this can be a good thing for you. Increased forclosures mean that banks and the HUD are even more willing to get rid of properties for 50-75% of their actual value. In some cases it is possible to buy a forclosed property and rent it out for considerably more than the monthly mortgage payment on the property.
7. Start A Part-Time Business - Starting a business is a opportunity that could change your life. However, you don't have to start big to start a business. Selling things on eBay in your spare time, doing pofessional consulting work, or even just selling a franchised product such as Mary Kay could be the jumping off point to an exciting new opportunity. Also, the extra money made from your business could really come in handy if you're strapped for cash.
8. Invest In Yourself - You are your own most valuable asset and your biggest opportunity. Instead of throwing your money at businesses that you have no control over via stocks or bonds sold on Wall St., take charge and invest in yourself. Whether it's buying real estate, starting a business, building a nest egg, or eliminating debt, you're investing in yourself and that's the most important thing. The more you have the mindset that you want to invest in yourself and your own opportunities, the more success you'll find in all of your endevours.
9. Invest Long-Term - I can't stress this enough, a recession is a temporary economic problem. It doesn't last forever. In fact, most recessions only last for a few years. While that seems like a long time, in the grand scheme of things, two or three years is the blink of an eye. The ten, twenty, or thirty year success of your investments is what you need to consider. In the short term, things might look rough, in the long term the prospects are excellent for jobs, the economy, and investments as a whole.
10. Don't Panic - Those who panic in a recession are the ones who end up losing the most. You are most likely to take losses if you are making short-term decisions and watching things too closely. A day-to-day outlook is not going to get you through this. You need to look five or ten years down the road. You need to be patient and react slowly, but confidently. In a time of crisis, walk softly but carry a big stick.
BONUS - Take Action Now! - The most important thing you can do to recession-proof your life is to take action now. We've given you ten different things you can do to improve your situation, so now you should pick one, two, or maybe all ten things and start taking action right away. Don't wait. The sooner you reduce debt and increase your assets, the better off you will be in case of a recession.
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