Nov 22, 2009
Smart People Are Planning Their Future In A Failing Economy
Don’t get caught in the herd mentality. A simple question to ask yourself when uncertain what to do – “What is the herd doing?” And then do the exact opposite. Here are a few tips to prepare your Financial Future in a failing economy you may find useful:-
Best Practice Suggests Not Doing The Following In A Failing Economy
Bail out. If you are like everyone else and running around selling your stocks and equity mutual funds now you are being really silly. Because the values are very low all you will end up doing is guaranteeing that you will a turn paper loss into a real one. After every recession there comes the next boom. Just like the sun rises in the east and sets in the west you can’t change it so you are far better off staying the course during times of economic uncertainty.
Stop saving. The strategy of dollar cost averaging your investments by making regular payments to your accounts, regardless of where the market is heading is still sound advice. Those regular contributions you’ve been making to your savings or retirement accounts are an important part of good financial discipline, so there is no benefit from stopping them now.
Speculate. While lower prices for investments are around opportunities will abound. Betting against the market can very easily get you into deep trouble. Especially as we are experiencing wild swings now. It is usually far better to make small, measured investments rather than large, hasty ones which are intended to make a quick killing. If you are on the internet be especially wary of tips by e-mail, to sell certain stocks, commodities, and other goldmine opportunities
Take on new debt. If you need to take on new debt and using the equity in your home be especially careful as any economic downturns affect job stability and investment income. This impacts directly on determining how much debt you can handle. Sometimes it is still necessary to borrow, to put your child through college or make an emergency repair to your home just be doubly sure that you’ve examined all the options and risks.
Stop living. Don’t over react and stop spending altogether. For example don’t putt off doing that maintenance on your car and home. And do not under stop paying your insurance policies as this will have negative consequences if a claim should arise. It is okay to buy gifts on your annual family vacation. While it is prudent to take caution, there’s such a thing as over-reacting. It is better to watch what you are spending and adjust if necessary.
To create a stable financial future you need to do something different. Do you have a Plan B? I am not talking about working an extra job. Think smarter. I am encouraging you to not scared but to look at starting or ramping your Plan B. It has never been more critical than it is right now to really plan how you earn your income.
