Money Matters With Nimi – Can You Recession-Proof your Finances?
With so much talk about the recession it is so easy to enter into the new-year with a feeling of doom and gloom with much anxiety about how it will affect you. Here is some good news; these challenging times will end, but before they do, there are some steps you can take to take the edge off the sting and dull its impact.
Live below your means
There is no magic formula to transform your personal finances. We will all simply have to down size and cut back and be frugal and disciplined. How much do you need to live on? If you are a two-income couple, imagine how much you could save, if you managed to live largely on one income and save the rest.
If your rent is crippling, ask yourself; do you really need all this space and must you remain in this area? Would your standard of living fall drastically if you moved to a smaller apartment in a more affordable neighborhood? Do you need all that office space or can you sublet part of it? Are you still driving around in a fuel guzzler every day? Are your children in a school that you cannot afford and is their education causing you to go into debt that is spiraling out of control? Avoid taking on more debt if you can help it; during a recession, debt obligations can be a huge drain, particularly if your income has fallen or is not increasing.
It is time to consider cheaper more sustainable options. Ask yourself the hard questions, answer them honestly, and give yourself peace of mind.
Have an Emergency Fund
It might seem absurd to say you need to continue to save but that is exactly what you need to do to provide you with a cushion in case of unexpected events. Job security is at an all-time low and many companies have had to lay off staff, cut salaries or even reduce work hours. How would you cope if you lost 50% of your income? This is precisely when your emergency fund kicks in. Remember that your rainy-day funds should be easily accessible; you don’t want to sell stock at a loss to pay for an unexpected emergency. Ask yourself; could you live off your savings for 6 months? If you have no savings, you really need to get started, bit-by- bit.
Diversify your investments
Are all your investments in the stock market, in one company, or in one currency. If all your money is in one place it is almost impossible to mitigate risk. Seek professional advice and review your investment portfolio and consider rebalancing if necessary. Asset classes tend to perform differently. With a diversified portfolio, you are generally in a better position to ride the market volatility without being forced to sell at a loss. Always think long term in your investment strategy.
Invest in yourself
When did you last invest in yourself? Don’t wait for your employer to develop you; indeed, many companies have cut back on training. You are your greatest asset and you owe it to yourself to continue to improve yourself by reading widely and learning. Fortunately, there is so much information and great material online; you can enroll for some outstanding courses that are relatively inexpensive. Invest in your network and the people that you spend time with. Networking provides you with new ideas, opportunities, and contacts. Ideally you should be networking all year round and not only when you need assistance badly.
Create multiple streams of income
There are only two ways to make more money; to cut back on expenses or to increase income. Even if you feel that your well-paid job is relatively secure, it is a good idea to have a back-up plan, an alternate source of income so that if one source is threatened, you have others to fall back on. As long as there is no conflict of interest and your employer is in the know, consider freelancing, consulting or putting one of your talents to use on the side. The “side hustle” is more important than ever for most people as it is unlikely that your salary will meet all your needs. It is also part of your back-up plan should you lose your day job. Every extra little bit helps. Keep your CV updated, even if you aren’t job hunting. You just never know when you will need to send one out in a hurry.
Can you afford to retire?
If you are close to retirement but it is clear that you will not be able to finance a comfortable retirement with the current state of your finances, if you are well, strong and able to add value, consider postponing retirement for a few years to give you more time to put things in place. You may well have 30 years in retirement, almost as long as your working life; it has to be funded.
These are time-tested strategies that will hold you in good stead during times of recession and when things get back to normal. If you develop these habits and make them a way of life, you will be much better prepared for the next recession; there certainly will be one.
HAPPY NEW YEAR!