To a great extent, the health of our economy rests on the shoulders of the American consumer's buying power. If we are able to continue spending, many corporations may report positive results, which will buffer negative downturns. However, the consumer may be running out of steam when you consider the low savings rates, high level of debt, home foreclosures and consumption of home-equity coupled with stagnant home prices.
Tips for Financially Challenged Individuals
Those in financial difficulty are more susceptible to the affects of a recession, because they probably don't have adequate savings or the ability to borrow more without risking financial disaster.
Negative financial circumstances can come at any time such as a major car repair or large health bill that isn't completely covered by insurance. But, if a recession were to occur there is a greater likelihood of other consequences such as:
? Corporate cut-back
? Difficulty obtaining credit
? Smaller wage increase
? Bonus reductions
? Inability to sell real estate
? Less overtime pay
? Slow sales and lower commissions
Prepare don't panic. Prepare instead in case you are thrown a financial curve ball. If you prepare, you will be better able to face financial challenges when (not if) they come.
"What can you do?"
? Delay large purchases: you may want to put off purchasing the new car or going on a big vacation. You can always buy the item later, but you usually can't take it back. This particular tip could potentially save tens of thousands of dollars.
? Accumulate money in savings or rainy day funds so that you don't have to pull money out of retirement funds, borrow, or fall behind on payments during a hardship. Savings can be invested in a money market account earning around 5%, which isn't great, but much better than paying 18% on a credit card for emergencies.
? Develop and follow a household budget and limit spending on discretionary items. Utilize good budgeting software to track all of your expenses. This way you can see if you are overspending in any particular category.
? Avoid unnecessary smaller ?want' versus ?need' purchases. For example, your cell phone contract may be due to renew, opt for the free or low cost phone and avoid the multi-media entertainment devices unless internet and email is a must for your business.
? Since transportation costs are a significant household expense, you may spend less on gasoline by combining trips, car pooling and public transportation.
? Spend wisely by becoming a student of money saving techniques: There are many excellent authors to help you save money such as Mary Hunt and money saving blogs that provide a whole host of money savings tips. Budgeting, limiting unnecessary purchases, and spending wisely can save you a few hundred dollars per month to help you build up your rainy day fund - all with little sacrifice to your standard of living.
? Develop your long-term goals. Having written goals and a mapped out plan of action puts your spending into the proper perspective. To get started list 10 things you want to accomplish, these goals can be things you want to achieve now or in the future. Secondly, get a financial plan. If you can afford to, consider hiring a financial planner. Not everyone can afford a financial planner, and some people prefer to do it themselves. Today there are more resources available than ever to help you do a lot of it yourself.
Tips for Financially Healthy People
Some people are naturally good financial managers or perhaps have not faced financial setbacks. If you are in this category, have a firmly established financial plan, excess income and savings - recessionary times provide opportunities that you may want to take advantage of.
? Become self-employed and or buy a company. Are you an experienced business person, with great ideas, work ethic and contacts but burned out in your corporate position? Owners facing recessionary times may want to retire or avoid enduring an economic downturn. Your ideas may breathe new enthusiasm and life into a business. Seek qualified legal and tax counsel to steer you through the transaction process.
? Purchase discounted large items: auto manufacturers are already beginning to offer buyer incentives.
? Invest: don't try to time the market by moving out of stock mutual funds, but stay with the proper asset allocation (that fits your risk tolerance and return expectations) between stocks and bonds funds regardless of short term economic forecasts. When stock values decrease you get more mutual fund shares for your money. You will likely enjoy great appreciation in your investment portfolio when the stock market goes up.
? Purchase real estate. Real estate purchased for investment purposes should always be for the long term since it can be costly to own and difficult to sell, however recessionary times may provide opportunities to purchase property which has gone down in value.
If you are wise and plan accordingly, recessionary times should not affect you deeply. Plan now and make good decisions. Regardless of whether we enter a recession or not, proper planning can help prevent a financial disaster and hopefully increase wealth. Remember, the best years can be ahead for those who correctly gauge the signs of a recession, take control of their finances, and seek ways to grow wealth regardless of the financial climate.
0 komentarze:
Post a Comment