There is some pretty good evidence that a another recession is looming.  It may or may not happen, but the prudent person will examine their finances and prepare for it anyway.

You might ask, “What can I possibly do?”

This is the voice of the helpless.  These are the people that will be standing in the unemployment line wondering what hit them and how they are going to pay next month’s mortgage payment.  Don’t be one of them!

5 Things You Can Do to Survive the Next Recession

Smart people do smart things especially when survival is at stake.  A double dip recession could be a major challenge to your financial well-being.  Therefore, it is a good idea to have a plan for protecting yourself from harm.

Here are five ways that you can survive a double dip recession:

1.  Plan for the Worst

Would you be able to meet your obligations if you lost your primary income or suffered a significant reduction in income for 3 to 6 months?  In tough economic times, this is very common.  Just take a look at My First Job Ended in Unemployment to hear about how Amanda found herself out of work for three months.  If a double dip recession really occurs, then I’d highly suggest that you have a plan for unemployment even if you think your company and your job is rock solid.  A lack of planning could leave you in dire straits.

2.  Simplify Your Lifestyle

You need to get your life in order.  The simpler and more organized your life is the easier it is going to be to survive a double dip recession.  Last year’s economy made this point very clear and we saw a lot of people take steps in this direction.  However, as talk of a recovery started, I think a lot of us drifted back toward our old ways.  It is once again time to get frugal and organized.  These two really do go hand in hand and serve you well in a recession.

3.  Learn to Say No

The key to effective budgeting is knowing when to say yes and when to say no.  A double dip recession is a time to say no to a lot of things.  For example, you need to say no to frivolous spending so you can say yes to paying off debt and creating an emergency fund.  Setting appropriate priorities and having the discipline to live by them is extremely important to surviving any economic downturn.

4.  Question the Old Way

With a recession looming, continuing to spend and act in the same way you did when money was flowing freely is insane.  You have to start questioning old ways to find new ways to survive.  For example, if you need to borrow money to go to college, then you might want to ask yourself, Is College Still Worth the Debt?  An education is paramount, but there are certainly other ways to pay for it besides student loans.  Don’t keep doing things the way it has always been done without thinking it through or you might find yourself in a real mess.

5.  Be Creative

Tough times call for tough measures.  I really liked the story I read about how one person paid for graduate school by renting out rooms.  You might not need to pay for school, but maybe you do need to pay next month’s mortgage payment.  Don’t let your house fall to foreclosure.  Get creative and you can survive.  Rent out a room, deliver pizzas in the evening or have a huge garage sale to generate a little extra income.  These things can mean the difference between surviving and dying in a tough recession.

Prepare for the Recession and You Will Survive

Again, I don’t know if a double dip recession will happen or not, but I’m not waiting to find out.  I’ve paid off my debt and I have an emergency fund of 3 to 6 months of expenses set aside just in case.  Are you prepared?  Do you have a plan or are you just hoping for the best?  I’d rather not leave my financial survival in the hands of someone else.  Therefore, I’m taking positive, proactive steps to protect myself and my family from any negative consequences of another recession.  Won’t you join me?

Photo by zieak

Now is the time to prepare for a better tomorrow.  Many people get caught flat-footed when the economic climate changes. 

They find themselves drowning in a financial mess and unable to save themselves.  Many have to start their life over from scratch.

Will you be ready to survive and thrive when the economy shifts again?  It doesn’t matter whether it goes up or down.  You’ll still need to exercise financial wisdom to do what is best for yourself and your family.

Prepare today and you’ll come out way ahead tomorrow!

Five ways to prepare yourself financially for a better future

Real financial wisdom is timeless.  It works no matter what hysteria is going on in the media or stock market.  Abiding by these principles will help you be in a position of strength no matter what direction the economy heads.

1.  Simplify and reduce risk

Complexity often works against your success with money.  A great example of this is credit card arbitrage.  In my opinion, it is too hard to manage.  One mistake and you could wind up owing tons of interest or losing an important asset.

I believe simpler is better.  I don’t see a need for numerous financial accounts.  I try to minimize the number so they are easy to keep track of and to manage.

I also avoid debt to reduce risk.  If I can’t pay cash for it, then I don’t need it.  Debt obligates me to someone and this reduces my freedom and choices.

When the economy goes good or bad, I want my choices wide-open so I can do what is best for my family at the time.

2.  Create a financial plan to follow

I begin every month with a plan.  I delegate every dollar I earn a job.  It has its assigned task for what I want it to do.  I do this by formulating a monthly budget. 

Does everything always go as planned?  No.  However, at least by starting with a plan, I am exercising what control I have.  When unexpected things arise, I modify the plan.

My money is a tool.  I want to squeeze every ounce of usefulness out of it I can.  My budget helps me ensure that my money abides by the priorities that my wife and I establish.

I structure my budget according to the wisest financial advice I can find.  This leaves me in a position to benefit no matter what the external circumstances.

3.  Tighten up your spending to create margin

Living on a budget doesn’t necessarily mean that you are frugal.  It just means that you planned in advance how to spend your money.  I like margin in my finances.

I like to know that I’m bringing in more than is going out.  This is margin.  It is room for error or for the unexpected.  Without margin, you are always one disaster away from financial ruin.  This is no way to plan properly for the future.

For example, what would happen if your spouse got hurt and couldn’t work for several months?  Could you survive?  You could if you had enough margin.

You create margin by cutting back on your expenses.  Yes, this may require some adjustments to your lifestyle, but the peace of mind that it affords is well worth it. 

4.  Increase your savings

Along with cutting back on expenses, increasing savings is a strong way to position yourself for whatever the future holds. 

For starters, you need to have an emergency fund that will cover 3 to 6 months of living expenses.  This protects you from all the unplanned things that can occur like a hot water heater going bad or losing your job.

In addition, I am saving for retirement and for my kids college.  These are both things that are going to require a sizable pile of cash.  This means I need to plan for them now.

The more cash you have on-hand, the better.  With cash, you can take advantage of the deals and opportunities that arise no matter which way the economy goes.

5.  Plan for uncertainty

I recognize that no matter how hard various financial analysts try, they cannot predict the future.  That’s why if you try to game the system by leaning the direction you think it is going to go you could get tripped up.

The better plan is to organize your finances conservatively so no matter what happens you are prepared to handle the unexpected twists in life.

Things rarely go as we hope or as the so-called gurus on television expect.  Plan for uncertainty.  Don’t get caught like a deer in the headlights.  Expect the unexpected.

If you do the things above, you won’t have to worry yourself with every what-if scenario.  You’ll be prepared to handle whatever arises!

Follow this financial wisdom to a better future

Run your personal finances just like you would a business.  You are the CFO of your life.  Apply this financial wisdom and you’ll emerge a shining star!

What financial wisdom would you like to share?

Photo by Jake Wasdin